Do not criminalise young people’s digital incomes
Though the world of cryptocurrencies remains little understood, it is imperative that government agencies seek to learn more about them because this financial technology is ahead of regulation.
Granted, one role of government agencies like Central Bank of Kenya is to regulate the flow of money into and out of the economy. As such, it is important to understand the source of any money that makes its way into Kenya’s banking system.
However, this is where the conundrum begins. First, government agencies and political leaders are always urging the youth to become enterprising and create their own jobs and wealth.
Which sounds fine. Until a young woman receives Sh102 million from her boyfriend who trades in Bitcoins. Before she can say “OMG!” the Asset Recovery Agency swoops on her account and promptly declare her windfall proceeds from money laundering even before it has satisfied itself that a crime has been committed. Interestingly, hardly any government agency raises questions when people export money.
First, we must acknowledge that investigative agencies ought to play their role in determining income derived from criminal enterprise. Second, we must accept that with today’s digital economy, which has many new financial products that were not anticipated in traditional money markets, it is possible for young people to earn – or lose – large sums of money over short periods.
Take derivatives for instance. It is entirely possible for a buyer to place an order for futures like oil today and tomorrow, due to a major shift – say outbreak of war in an oil producing country – the price of oil shoots through the roof. That would make such a buyer instantly rich. How then, are they to wire their earnings into their bank accounts without being accused of money laundering?
Second, governments have traditionally enjoyed a monopoly in deciding what is currency and what its value is. That is why they can devalue a currency today and shore it up tomorrow to meet their exigencies.
What government regulation of financial markets does is to provide a standard value on which to base transactions so that one man does not use cowrie shells and another gold to pay for goods and services.
With cryptocurrencies, however, governments are losing this monopoly because cryptocurrencies are left at the mercies of a free market. Anyone can assign a value to their Bitcoins, and anyone else willing to pay for them at that price is free to buy them, the same way banks and bureaux buy and sell foreign currencies. This is a major disruption in the financial markets globally and this is what makes cryptocurrencies “dangerous” in the eyes of governments. However, progressive ones like that of Nigeria have made a bold move to adapt. Earlier this month, Nigeria launched its first digital currency, the e-Naira, becoming the first country in Africa to do so.
Incidentally, when Facebook bosses came to Kenya about two years ago seeking regulatory approval for Libra, their digital currency, CBK turned them away. Since then, however, Kenyans have emerged as some of Africa’s biggest adopters of cryptocurrencies. According to one report, they traded currencies worth $55 million (Sh5.5 billion) last year alone, a sum that made Kenya Africa’s biggest trader in cryptocurrencies.
Although CBK continues to frown on digital currencies, several Kenyan companies – some driven by young techies who are experts in blockchain technology – are already offering cryptocurrency trading platforms. Blockchain is still a grey area in Kenya and is likely to remain so until regulators and policy makers take a deliberate step to understand it. Only then can they come up with policies that will regulate players in this segment. Which brings us back to the question regarding 21-year-old Felista Njoroge and the Sh102 million in her bank account. First, it is important for government agencies not to be seen to be witch-hunting her account solely because she is young, or worse, a woman.
Secondly, investigators – and courts – must satisfy themselves that the money was illegally obtained before they fall all over themselves trying to block her from spending it. Thirdly, they ought to follow due diligence in their investigations and refrain from sharing personal data that could compromise her security or make it untenable for her to return home. It is not a crime to receive Sh102 million. If a crime has been committed, it ought to be proven beyond reasonable doubt.
—The writer is Partner and Head of Content at House of Romford —[email protected]
