The Computer Society of Kenya

Since 1986


Wednesday January 29, 2020

While at the World Economic Forum at Davos last week, the CBK Governor Dr Patrick Njoroge sent out a flurry of tweets that caught the crypto enthusiasts in Kenya by surprise and sent them talking.

Essentially, the governor seemed to warm up to the digital currency or crypto conversation, in stark contrast to his 2015 circular to financial institutions.

In one of his tweets, the governor seemed to indicate support for digital currencies or cryptos, as long as there is a solid regulatory or a governance framework.

It is difficult to tell what governance framework he has in mind, when he has not yet outlined the role and depth the he foresees the digital currencies playing within the Kenyan economy.

If the role he anticipates is similar to the one described in the Kenyan Blockchain report, then there would be less need for additional governance structures or rules.

The report recommended that Central Bank may issue its own crypto currency, commonly known as the Central Bank Digital Currency (CBDC) whose value would be pegged on the Kenya shilling.

Also known as a ‘stable-coin’, such a crypto currency would mainly be used at the wholesale level to enhance transparency in the transactions that CBK has with its regulated commercial banks.

In such a case, the integrity of the recordkeeping that CBK has with its regulated entities would be enhanced and cases of falsified audit reports that often preceded failed banks, as experienced four years ago in Kenya, would be reduced.


On the other hand, if the role that the CBK governor anticipates for crypto currencies is similar to that currently played by Bitcoin – the King of cryptos - then the risks and opportunities occasioned would grow exponentially.

Though developed and introduced to the world ten years ago, the crypto-currencies in the spirit of Bitcoin are basically still at the stage we call the ‘Wild-Wide-West’.

They are by design not controlled by any central authority, they are borderless and are often considered anonymous though they operate pseudonymously. This is fertile ground that attracts innovators, investors and criminals in equal measure.

Already, several of Bitcoin variants have claimed their Kenyan victims, with NuruCoin launched last year with much fanfare having apparently gone down with billions of shillings belonging to Kenyan investors.

A quick search on the web doesn’t show much of their presence – other than some outdated Facebook page, which was last updated in April 2019.

These are the same realities that the American pioneers pushing the frontier to the west encountered in their search for gold and opportunities.

They found both gold and disasters in equal measure.


It took a while for the dust to settle, for the laws and regulations to kick in and bring order in an otherwise lawless, wild west environment.

The same thing is likely to happen in the crypto world. As the saying goes, technology will always precede the laws and regulations.

However, before then, there will be honest actors, there will be crooked players and there will be winners, victims and scammers before the dust settles.

In the developed economies, the law is beginning to shape up around the key actors in the crypto space.

Starting with entities that convert cryptos into traditional national currencies, the US jurisdictions expects these cyrpto exchanges to be registered, and their customers taken through KYC – Know Your Customer procedures.

Other regulatory interventions include providing for a regulatory sandbox like what the Kenyan Capital Market Authority (CMA) is currently offering.

Through this sandbox, the CMA provides a temporary and restricted licensing framework for FinTech innovators to develop ideas in an open space, rather than operating below the regulatory radar - with the increased risk to exploit innocent users and investors.

It would be interesting to find out exactly what role and depth of crypto activity the CBK governor is willing to experiment with.

More specifically, will he update his stern 2015 circular to reflect the changing mood that his recent tweeter feeds portrayed?

Only time will tell.

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