Advertisement

The life of a virtual currency dealer

Tuesday February 13 2018
mitrosoft

From left: Mitrosoft founders Jonathan Musinguzi Kato, Festo Ivaibi and Andrew Senyomo in their Kampala office. PHOTO | COURTESY

By AGGREY MUTAMBO

In 2017, a story was told in Uganda’s Daily Monitor of a pastor who was worried that a member of his congregation had sold everything to invest in a digital currency deal.

Unable to convince him to drop the idea, the worried cleric shared the story with a financial expert and the matter escalated to the Bank of Uganda, the banking regulator.

Faced with a series of fears, myths and complaints, the central bank's governor, Prof Emmanuel Tumusiime-Mutebile, told the public they were on their own.

“The Bank of Uganda warns the general public that whoever wishes to invest their hard-earned savings in cryptocurrency forms… is taking a risk in the financial space where there is neither investor protection nor regulatory purview,” he said.

“The public is strongly encouraged to do business with only licensed financial institutions.”

Authorities in the six-member East African Community relayed the same message, with the Central Bank of Kenya Governor Patrick Njoroge cautioning that investors will be exposed.

Advertisement

Business of the unknown

But if authorities expected the public to cow, some saw the risk as an opportunity.

In Kampala, situated above the Boulevard Building and opposite the crowded Post Office along Kampala Road, Jonathan Musinguzi Kato, Festo Ivaibi and Andrew Senyomo quietly strategised on how to delve into a business of the unknown.

Fresh from college with degrees in finance and information technology, the trio formed a company called Mitrosoft, which they branded “a fin-tech start-up.”

“We major in trading in cryptocurrencies and educating people,” Jonathan, 23, told the Nation in an interview, perusing through a big notebook where he had listed a number of digital currencies.

“Our agenda is to educate, alongside trading. As you pass on education, people realise that cryptocurrency is not a scam, but an opportunity you can get into.”

After graduating in 2016 from the Uganda Christian University, Jonathan tarmacked looking for a job, incidentally developing interest in the stock market, banking on his knowledge in finance.

But in a country whose economy is largely cash-based, the stock market gives little and is often volatile, meaning you could lose your money just as much as you can gain.

'Future of money'

So he opted to try out the cryptocurrency.

“It has not been an easy ride but right now, cryptocurrency, I can term it as a market itself,” he said.

“People are shifting their trust from institutions like banks and getting confidence in cryptocurrencies. Cryptocurrencies change lives. It has given me an opportunity to grow.”

Cryptocurrencies are digital monies that use cryptic algorithms for security and run on a complex code system called blockchain.

This security feature makes it difficult to forge or fake transactions and is immune to any central control.

An example of cryptocurrency is bitcoin, where every ‘coin’ has a certain dollar value.

As of 2017, its value rose nearly eight times between January and December, reaching $7,500— buoyed by increasing demand for limited number of ‘coins.’

And given the population investing in the ‘coins’ is 18 to 35 years old, the three see it as the “future of money.”

“It is good business but it depends on how you are doing it? If you are doing it for long-term, it is very profitable, except you don’t see who you trade with.”

For Jonathan, entering in this world left him uncertain.

On one hand, the government was giving warnings.

On the other, his family, which initially encouraged him, developed cold feet on learning the venture was not protected.

Yet he invested an initial $1,000 worth of ‘coins’.

High liquidity

“We treat cryptocurrencies as an investment so our clients either venture in for (the) short-term or long-term.”

Their fledgling firm now handles an equivalent of $500,000 worth of portfolios of cryptocurrencies— ranging from bitcoin, ethereum, litecoin, ripple, monero, and several others identified as good for investment.

The trio admit they charge a certain fee to advise people to invest but are unwilling to give figures.

So how do they advise which ‘coin’ to buy and sell?

The best ‘coin’ has to have high liquidity, the ability to be accepted, be bought and sold and converted back into cash.

Bitcoin enjoys all the above features.

One should also look at the developer since the credentials of the people behind creating a digital currency give it credibility.

Some indication is in the way some global banks accept the coins. 

Regulation

Then you have to look at the community— if it grows, taking in folks from around the world, then it is good as these people give ideas on how to improve it.

In the meantime, the battle to convince authorities continues with the trio hoping regulations will follow this innovation.

Some economists think it is only a matter of time before we embrace digital currencies.

The initial difficulties in getting accepted are expected, noted economist Bernard Ayieko.

“There is speculation that the G20 countries will come up with a regulatory framework for cryptocurrencies,” he told the Nation, arguing this could fuel adoption in other economies.

Prof Bitange Ndemo said the fear-mongering is routine for every new innovation but with time, people discover its need.

“This new technology offers great hope not just in backing up virtual money but also in its application in land registries, music and other assets,” he wrote in the Business Daily

Advertisement