Central Bank of Kenya warns of Bitcoin risks

Tuesday December 15 2015

The Central Bank of Kenya has warned against

The Central Bank of Kenya has warned against the use of Bitcoin and other unregulated digital currencies in Kenya saying they are insecure and could be used to fund terrorism. FILE PHOTO | JENS KALAENE   

By BRIAN NGUGI, [email protected], @brian_ngugi

The Central Bank of Kenya Tuesday joined other regulators around the world ratcheting up warnings against the use of virtual currency Bitcoin, saying it carries risk.

The regulator said, that it should not “be held liable for any losses” incurred by consumers using digital currencies to settle transactions, as the digital currency is not a legal tender in the country.

Bitcoins are normally generated by computers and do not enjoy the backing of any central bank or by physical assets, their value depends on people's confidence in them.

“Virtual currencies are traded in exchange platforms that tend to be unregulated all over the world. Consumers may therefore lose their money without having any legal redress in the even these exchanges collapse or close business,” CBK warned in the notice.

China, France, European central banks among those who have warned citizens against the lure of virtual currencies saying they have no legal backing.

UNTRACEABLE AND ANONYMOUS

Kenya's central bank issued the warning as it cited several risks it said are associated with buying, holding or trading virtual currencies.

They include, “being untraceable and anonymous,” making them susceptible to abuse by criminals in money laundering and financing of terrorism.

The Bitcoin is neither regulated nor illegal in countries such as the US, Germany and UK. More positive regulators have however said it should be used as a currency but not a legal tender.

The currency is also highly speculative and has since fluctuated from $340 to $1,240 posing risk to its holders. Regulators fear it could be used to support money laundering, drug trafficking, bribery and terrorism.

“The public should therefore desist from transacting in Bitcoin and similar products,” the bank said in paid advertisement in the dailies.