Banking and Finance

CRYPTOCURRENCIES; IS THE KENYAN FINANCIAL SYSTEM READY?

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cryptocurrencies bitcoin

While the term cryptocurrencies might be new to you, it is quite the rage in today’s digital space. Within the last five years, there is a term that has become familiar in the investment arena. That term is Bitcoin.

Just out of the blues everybody started hearing these terms. Cryptocurrencies and bitcoin. The media, government, and private entities were the most unreserved on the subject. What is it? Why is it rising? Is it another Ponzi scheme?

All this hullaballoo pointed to the dawn of a new era. The age of the internet generated money. This might sound funny in the first mention but if you take a deep evaluation, it is a subject worth serious evaluation.

This article will be trying to evaluate what is cryptocurrencies in general and their suitability in the Kenyan financial system. It will also try to establish whether cryptocurrencies are a fallacy that will fade as soon as the noise settles.

Bitcoin is one of the countless thousands of currencies in existence today. The uniqueness concerning it is that it was the first, it is the most valuable among the peers and forms the base through which all other cryptos are valued.

cryptocurrencies bitcoin

It behaves like the dollar of the cryptocurrency. Mainly because any price action on Bitcoin has a direct effect on the rest during the bullish or the bearish end.

A Global Overview Of Cryptocurrencies

Globally, the acceptance of this development has been both friendly and hostile. This is because nations participate differently in the global financial systems.

Those that feel excluded and forgotten, have received this as a long-awaited blessing. They are actually advocating for a faster adoption with some actually initiating the creation of national cryptocurrency.

For the rest who have a bigger role in the current status quo, they have opposed it fully and some banning it completely. This is because money has always remained a sensitive issue partially because whoever controls it controls the world.

A brief view of the global situation is that India, Venezuela, and Russia are trying to create a national cryptocurrency. Countries like Malaysia, Japan, and the USA have legalized trading of the currencies.

Africa has been the most reserved market in the trade. It is also the continent with the lowest trading volumes. Policymakers have also been mum on the issues probably awaiting the events in the global arena.

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The top three African countries trading the cryptos’ are South Africa, Kenya, and Nigeria. The three coincidentally represent the top countries in technology in the continent.

A Quick Overview of Cryptocurrencies in Kenya

Traditionally, Kenya has been a technological leader more so in the adoption. This is due to high technological penetration coupled with a highly literate population.

Cryptocurrency has not been an exception. Thousands of Kenyans have participated in the trade with many more expressing interests.

Policymaker through the Central bank Of Kenya has issued several cautionary warnings but has not expressly banned the trade. Indeed, there was a task force commissioned to study the position of the country on cryptocurrencies and the feedback released recently was positive.

In all functional economies, the key industry in the success of any financial system is the banks. Banks operate in a centralized system that is controlled by the Central bank.

I need to note that the sole reason and purpose of cryptos is decentralization. It a direct opposition to the current financial system.

The founders envisioned a circumstance whereby they would create a global currently autonomous of the governments. This is one of the important reasons some governments are in an all-out-and-out war with the cryptos.

Kenya as it stands does not have either policies or statistical data defining the whole process of these digital currencies from creation to transaction.

This has made it harder for the banks to participate in these markets. These currencies are as well highly volatile making them risky hence, most institutions have instead taken a wait-and-see approach.

There is also a huge knowledge gap in this sector. People are yet to understand the whole concept of the blockchain (The technology used to generate cryptocurrencies) let alone the usage of the same.

As a participant in the global financial system, Kenya still bases its currency on the dollar making us closely tied to the events on the global stage.

cryptocurrencies bitcoin

Some of the Kenyan trading systems like EGM SECURITIES is yet to introduce these currencies as trading options shows a maturing market compared to their global peers.

Conclusion

As currently positioned, the Kenyan financial system is still far from this realization on both policy and execution matters. We still need to do more research on the best approaches that suit our country.

If we deem it fit we can as well develop a national currency that must be based on a platform that resonates with the people. This being said, we cannot sit back and wait.

We need to engage in the global arenas to avoid being left out and start playing catch up. My opinion is that the technology driving these currencies is very strong and so its relevance will outlive.

What do you think? Let me know in the comments below.

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