Central Bank Governor Warns Kenyans to Avoid P2P Crypto Transactions While Banks Risk Licenses Getting Revoked

According to a local Kenyan publication, the East African, Patrick Njoroge, the Governor, Central Bank of Kenya (CBK) has warned Kenyans to avoid to peer-to-peer (P2P) cryptocurrency transaction since it is not regulated.

The Governor further highlighted that many people are trooping to cryptocurrencies because of the hope of striking big, issuing a warning that, this is not always the case:

“There are people who see it as a sort of investment that they can win big because prices are going up quickly, so they believe they would see a huge return for their investment.

But I think that is why we say for every person who wins something, there are hundreds who lose.”

– Governor, Central Bank of Kenya

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If that were not enough, the East African says that Njoroge has again warned that financial institutions supporting P2P transactions risk losing their licenses.

To support his statement, the governor noted that the ban has existed because ‘we were seeing significant risk from cryptocurrencies not because it was unregulated but because of services it was supporting, majority which were illegal transactions.’

His statement is in reference to a warning issued in 2018 to lending institutions in Kenya not to facilitate crypto transactions with firms dealing in crypto. However, lending institutions and mobile money operators regulated in Kenya, such as M-PESA, have continued to facilitate crypto transactions, including P2P.

A quick scan through the marketplace section of one of the leading P2P marketplaces in Kenya shows banks like Standard Chartered, Equity and M-PESA being options provided by traders to send each other fiat as they exchange cryptocurrencies such as Bitcoin and Ethereum.

Like centralized exchanges, peer-to-peer Bitcoin marketplaces use order books to match their buyers and sellers. However, instead of acting as a middleman for the buyer and the seller, the only time they interact with traders is when there’s a dispute. This means that buyers and sellers complete the trade themselves, and banks do not deal with the exchange.

The P2P traders send each other crypto in wallets and exchange fiat through several payment options that are provided by the P2P exchanges. To protect against the risk of someone not making payment for the crypto they received, they use Escrow. This is a third-party service that holds onto the promised BTC until the seller is paid.

In 2021, in the height of bans and warnings from regulators, P2P crypto trades flourished across the continent, a situation which saw 6 African countries rise to the top of Chainalysis’ Global Crypto Adoption report.

The report ranked Kenya first globally when it comes to P2P crypto transactions.

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RECOMMENDED READING: A Quick Guide on P2P Crypto Exchanges

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