Why Kenya's embrace of Bitcoin is a fantasy

A Motherboard reporter who recently visited Kenya to document Bitcoin's achievements there said that the Western media's hype about Kenya being a pioneering laboratory for Bitcoin is largely a fantasy. The reporter was accompanied by Kenyan writer Daniel Nairo, who expressed his views on his country's untrue propaganda about Bitcoin.

Bejo Bar and Grill in Nairobi lists its payment processor Bitsoko on its website, but when this reporter visited, no one was using Bitcoin. Allen Juma, who founded Bitsoko with his brother Gibson , said they had been trying to strike partnerships with Bejo and other merchants before they realized there weren’t enough merchant candidates to keep trying. They then turned their attention to developing a Bitcoin microtransaction app.

Bitsoko recently received $100,000 in funding from the Bill and Melinda Gates Foundation.

False advertising?

Juma admitted that the images that appeared on Bitsoko's website were actually from another agency in Nairobi.

Juma had already switched from Dogecoin to Bitcoin. Two and a half years before founding Bitsoko, he was working part-time at an internet cafe. While he was maintaining and repairing computers, he found that he did not have enough internet access to reach the business.

Juma, who now has a brand new website with all new images, said he is experimenting with other blockchain applications and that he loves Bitcoin but doesn't believe it can change everything.

Bitcoin supporters in Kenya are looking forward to the future development of the technology, but only a few Kenyans use Bitcoin.

Kenyan startups in the spotlight

New York native Elizabeth Rossiello was working in microfinance in Kenya before launching Bitpesa , a service that connects local currencies with digital currencies . Within a month of launching the service in 2013 , she was inundated with questions from journalists about how bitcoin was converted into remittances and how expatriate workers’ salaries were transferred to their home countries.

Rossiello said a Bloomberg News article about Bitpesa in November caused a stir, saying that the rising price of bitcoin for remittances in Africa would bankrupt Western Union. Other articles followed, focusing on the $1.5 billion in remittances that flow to Kenya each year.

However, the remittances did not arrive as predicted. Beam, a Ghanaian startup founded in 2014, tried to undercut its competitors in the remittance market. According to the news website Disrupt Africa , the company stopped using Bitcoin for remittances in August due to the high cost of converting Bitcoin into local currency, the small number of merchants accepting Bitcoin, and the volatility of Bitcoin prices.

Limited remittance benefits

Rossiello said remittances have always been part of Bitpesa’s business, but it is not the only business and certainly not the entire business. Bitpesa’s business areas include e-commerce, speculation and remittances.

Soon after the Bitpesa scandal in Kenya, some startups went bankrupt and others changed direction.

Bitcoin investors who come to serve poor and unbanked Africans sometimes combine a bit of evangelism with their sales pitch. Rossiello said she needs to remind people that she is running a small business, not a charity like vaccinating orphans.

“We can’t tell you that we believe we can lift people out of poverty there,” she said , stressing the point after investors saw Kenya as a place in need of Western technology, adding that they didn’t understand or want to understand the country.

Rossiello also said that in Kenya, seemingly simple things take a long time. For example, when you say you have "tremendous traction," they don't understand what "traction" means.

She said she had seen local technology companies plead: "Every Kenyan needs to have a Western mindset. "

Westerners don't know Kenya

An American who chatted with writer Nairo online had never been to Kenya but wanted to set up a non-governmental organization (NGO) in Kenya.

Nario recalls that when he listened to news about Kenya on the BBC, he always wondered why the Kenya in these reports was not the place where he lived. When the news about Bitcoin began to be reported, they took him as a symbol of popularity. Nario said that Western audiences don't want to hear about how to make money; they want to hear about how to help Africans who are living in dire straits.

After adding the digital currency to bitcoin.com , Nario said he believes in blockchain technology. He also added that the bitcoin community in Kenya is still small but growing. Nario noted that there are only a few hundred people, most of whom are traders. Bitpesa recently announced in a local daily that its business has more than 5,000 active customers in Kenya.

Developer Stephen Gornick was interviewed in a recent documentary about the current state of Bitcoin in Kenya and said that Bitcoin activity in the country is very low. He said that the peak number of actual Bitcoin transactions in Kenya is only about 50 Bitcoins per week. Although Bitcoin has certain development potential, the current situation is not optimistic.

Bitcoin is not widely accepted in Kenya

Nario said that Bitcoin will not be widely accepted in Kenya in the short term unless a real killer application emerges . In the meantime, there are still many obstacles to overcome. For example, the government has not yet clearly defined regulations on how to manage Bitcoin. In addition, the government is also cautious about the use of digital currencies.

Kipochi, a global wallet , promised customers in 2014 that it would provide the ability to send and receive Bitcoins through the Safaricom M-Pesa network. Safaricom is a domestic telecommunications service in Kenya and M-Pesa is a mobile money transfer service. However, the project failed within just one year. Fast Company magazine reported that according to insiders, media reports indicated that one-third of Kenyans had access to Bitcoin wallets, but the reality is that only a very small number of people are using Bitcoin.

Kipochi founder Pelle Braendgaard said that M-Pesa acts like a gatekeeper to isolate startups from the market. According to another mobile platform CCN, M-Pesa stopped Bitcoin transactions on its platform because it faced the dual challenges of Bitpesa and Lipisha .

Braengaard , who is no longer active with Kipochi , said all parties needed to protect existing markets while complying with global anti-money laundering regulations that keep them away from unbanked migrants and international traders.

Nairo said people initially get excited about Africa because it's a place that needs help. Some people may think they are really helping the country, but the truth is, they are just businessmen like everyone else.

What is needed here is humility and respect

There is a danger in trying to hide the complex realities of African countries. Teju Cole, a Nigerian-American writer , criticized the U.S. response to a 2012 video by Kony that said Africa was just a playground for Western explorers. Only solutions that start with humility and respect can make a difference, Cole said.

Africa offers real opportunities for digital currencies, but the top-down approach of Western countries may not be the best way to seize this opportunity. In fact, this approach may create a bubble effect. Africans are busy adapting to the digital currencies they need, on their own timeline, without guidance from well-intentioned Westerners.