Regulatory Alerts2015-12-18
Banking Circular No 14 of 2015 - Virtual Currencies - Bitcoin
The Central Bank of Kenya (CBK) has issued a banking circular warning commercial banks, mortgage finance companies, and microfinance institutions against dealing in virtual currencies or transacting with entities involved in such activities. It informs that virtual currencies like Bitcoin are not legal tender in Kenya, lack government or central bank issuance or guarantee, and may involve high risks due to their anonymous nature, susceptibility to criminal abuse, lack of legal redress for consumers, unregulated trading platforms, and speculative value fluctuations. The CBK has expressly advised financial institutions against opening accounts for individuals dealing in virtual currencies, with non-compliance leading to appropriate remedial action.
BANK UU YA KENYA Haile Selassie Aven P. O. Box 60000 - 00200 Nairobi, Kenya December 18, 2015 Telephone: 2860000, Fax: 340192
Banking Circular No 14 Of 2015
TO: ALL CHIEF EXECUTIVES OF COMMERCIAL BANKS, MORTGAGE FINANCE COMPANIES AND MICROFINANCE BANKS
Virtual Currencies - Bitcoin
The attention of the Central Bank of Kenya (CBK) has been drawn to articles carried in the print media in the recent past on the use, holding and trading of virtual currencies such as Bitcoin in Kenya. Bitcoin is a form of un-regulated digital currency that is not issued or guaranteed by any government or central bank.
CBK wishes to inform all financial institutions that virtual currencies such as Bitcoin are not legal tender in Kenya and therefore no protection exists in the event that the platform that exchanges or holds the virtual currency fails or goes out of business.
Some of the risks associated with buying, holding or trading virtual currencies include the following: · Transactions in virtual currencies such as Bitcoin are largely untraceable and anonymous making them susceptible to abuse by criminals in money laundering and financing of terrorism.
· 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 event these exchanges collapse or close business.
There is no underlying or backing of assets and the value of virtual currencies is .
speculative in nature. This may result into high volatility in value of virtual currencies thus exposing users to potential losses.
The purpose of this Circular therefore is to caution all financial institutions against dealing in virtual currencies or transacting with entities that are engaged in virtual currencies. Financial institutions are expressly advised not to open accounts for any person dealing in virtual currencies such as Bitcoin. Failure to comply with this directive will lead to appropriate remedial action from the Central Bank.
1 In the event of any query or clarification, please contact: The Director, Bank Supervision Department Central Bank of Kenya P. O. Box 60000 - 00200 NAIROBI Tel: 286000 Email: fin@centralbank.go.ke
GERALD NYAOMA
Director, Bank Supervision
cc: Chief Executive Officer Kenya Bankers Association 13th Floor, International Life House Mama Ngina Street NAIROBI Chief Executive Officer Association of Microfinance Institutions Methodist Ministries Centre NAIROBI