* NAIROBI, Kenya – February and March have been tough months for Carol Maina, 38, a mother of three from Langata, an estate in Kenya’s capital, Nairobi.
First, she lost her job and then fell into an online scam where she lost savings meant to protect her in tough economic times.
“I had saved Sh 4.2 million ($ 39,485),” she told Zenger News. “A friend who knew I had lost a job put me in touch with people who claimed to be cryptocurrency traders. They convinced me to invest Sh 3 million ($ 28,212) to buy something they called Bitcoin.
She said the “Bitcoin gurus” convinced her that she would make a 50% profit in two weeks. However, she lost all the money.
“I planned to withdraw all the money if I got Sh 1.5 million ($ 14,107) on top of my Sh 3 million ($ 28,212). I would use Sh 2 million of the Sh 4.5 million ($ 42,322) to invest in an online clothing business.
Its story is similar to that of hundreds of Kenyans who lost their savings to cryptocurrency scammers who cannot be traced.
“Anything that has the characteristics of Ponzi, a high yield investment program in which they ask you to invest your money and earn amounts on a daily or weekly basis, should be avoided,” said George Mwakisha, head of development. trading for Kenya on the Chinese cryptocurrency platform Binance. .
Despite a government advisory from the Central Bank of Kenya against the use of cryptocurrencies by citizens, more Kenyans have used government guidelines to stay at home to contain the spread of the Covid-19 pandemic and try their luck in the crypto market. Yet not everyone has a success story to tell.
“I can’t believe I lost 90,000 Sh ($ 846),” Joel Ondieki, father of two at Umoja Estate in Nairobi, told Zenger News. “Money for rent, tuition, and home purchases to invest in an area I knew nothing about. He was fooled when Bitcoin hit an all-time high of $ 64,000 last month.
Nairobi-based author Benjamin Arunda claims Kenyans fall prey to huge promises of profit from third parties because they don’t understand how blockchain and crypto trading work. (Clint Adair / Unsplash)
Nairobi-based ‘Understanding the Blockchain’ author Benjamin Arunda told Zenger News the Kenyan scam rate has skyrocketed, with the price of Bitcoin appreciating over 1200% since March 2020 .
“90% of my crypto clients, who consult me on how to invest, are people who have been scammed or someone they know has been scammed,” he said. Kenyans crave additional income quickly, which makes them vulnerable to get-rich-quick schemes. “
He said Kenyans fell prey to huge promises of profits from third parties because they did not understand how blockchain and crypto trading work.
“The case of Kenicoin, which scammed Kenyans especially in central Kenya, capitalized on the lack of information in rural areas of the country. If Kenyans can be wise enough to seek knowledge first, they can escape most scam traps, ”he notes.
The scams have thrived on the gaps in digital financial literacy. They promise to guarantee returns and tend to have very compelling risk-free investment models, which is never realistic even with conventional investments.
“We will be fooled until we create locally regulated sandbox exchanges,” Bitange Ndemo, chairman of the Kenya Distributed Ledger and Artificial Intelligence Working Group, told Zenger News. “Our people are looking online for exchanges where fraudsters pounce on vulnerable customers. The internet has as many fake people as there are real people.
According to Betty Wambugu, whose cafe in Nyeri town accepts crypto payments, young Kenyans who are unemployed or earning little are getting into crypto trading because of its flexibility to trade from anywhere, anytime. when.
“Before investing their hard-earned money, let them invest in education through verified online platforms or by subscribing to online courses,” she said.
The Kenyan elite have a soft spot for crypto business because they have disposable income. They have seen trade increase despite regulatory hurdles.
Therefore, with the increase in unemployment and the thirst for additional income, cryptos are seen as an alternative get-rich-quick option. But even the middle class watched helplessly as their money flew away.
“What Kenyans should know is that the person who holds the private keys to your wallet is the owner of the crypto, so insist on keeping your private keys. This can only happen if you learn first before you invest, ”said Arunda.
In 2020 alone, despite the economic hardship caused by the Covid-19 pandemic, an investigation by the African crypto market company, Paxful, indicates that there have been more Bitcoin transactions in Kenya than ever before, with trade volumes reaching 5.1 billion shillings ($ 47,963,913) —a 472% increase over 2019.
Cryptos include Bitcoin and other digital currencies such as Ethereum, Binance Coin, Bitcoin Cash, Litecoin, and Ripple. (Jack Taylor /.)
Kenya traded a total of 5,895 Bitcoins between 2015 and 2020, with Nigeria having traded 63.15 billion shillings ($ 593,911,933) worth of Bitcoin in 2020. South Africa is third at 2.1 billion. shillings (19,749,040), with Morocco fourth at 229.8 million shillings ($ 2,161,261), according to data from Paxful.
Many Kenyans are ready to buy, sell and trade using cryptocurrencies, according to the Mastercard New Payments Index released on May 6. Cryptos include Bitcoin and other digital currencies such as Ethereum, Binance Coin, Bitcoin Cash, Litecoin, and Ripple.
“As global interest in digital currencies continues to accelerate, four in ten people in Kenya say they plan to use cryptocurrencies within the next year. Sixty-nine percent say they are more willing to use them than they were a year ago, ”the report says.
But dangers still exist as digital currency trading remains unregulated, leaving consumers vulnerable.
“The high risk, complexity and uncertainties of regulation deter the mass market from testing its disposable income on crypto investments,” said Roselyne Wanjiru, blockchain consultant at Pesabase.
The fact that cryptocurrencies operate on a blockchain makes it more difficult to regulate an industry worth more than Sh200 trillion ($ 18,799,952,045), according to the specialist site Coinmarketcap. The site lists over 9,000 different cryptocurrencies.
The loss of private keys has resulted in the loss of over 4 million Bitcoins worldwide by people who cannot remember their passwords.
Despite the volatility of digital currencies, individuals and businesses have made huge gains from trade, while central banks in some developed economies are working on their digital currency projects.
The loss of private keys has resulted in the loss of over 4 million Bitcoins worldwide by people who cannot remember their passwords. (Execution / Unsplash)
“Every developed country is in the process of creating a national cryptocurrency called a stable currency or central bank digital currencies. This is a clear indication that virtually everyone is moving towards blockchain-based currencies. Our aim should be to build capacity now rather than behaving like we would forever live in a cocoon, ”Ndemo said.
But to mainstream cryptos in Kenya, a more user-friendly regulatory environment with a supportive financial services industry is needed. Currently, it is impossible to buy crypto without using fiat money payment channels like MPesa, which is owned by Safaricom, Kenya’s largest telecommunications company.
“Mass education must continue. There is a need for the corporate world to look into research and fund the incubation of crypto and blockchain ideas, ”Arunda said.
Ndemo advised those looking to invest in cryptos to start small and understand each digital coin.
“Gain knowledge about the exchanges you use. Some cryptos have a clear purpose; assets support others, and of course some are just garbage in the market. “
Amos Kinuthia, training manager at Distributed Ledgers, Blockchain & Research Technologies, advised Kenyans to use a custodial service provider if they commit their money to a crypto business.
“Custodian banking services should be implemented in Kenya as well as in the United States to allow customers to preserve their crypto holdings,” he told Zenger News.
Alice Anangi, Managing Director of Zeden Technologies, said collaboration is needed between banks, fintech, crypto exchanges and the Central Bank of Kenya to form an appropriate regulatory framework that can enable fiat to crypto conversions in a rapid manner. and efficient. This move, she said, would benefit clients, institutions and investors while protecting their funds and assets.
“A huge hurdle that crypto traders currently face is converting from fiat to crypto and vice versa, as most banks currently do not support trading,” she told Zenger News.
(Edited by Kipchumba Some and Sarika Kumar. Map by Urvashi Makwana.)
The article Inside Kenya’s Cryptocurrency Trade: Tales Of Pain And Promise appeared first on Zenger News.