Financial lender warns against 'bitcoins' as holdings skyrocket in Kenya
Kenya is among countries with the largest bitcoin holdings in the world.
According to analysts from Citibank, Kenyans appetite for bitcoin which currently stands at more than Sh163 billion could proof disastrous to the country’s economy were the cryptocurrency to collapse.
“If bitcoin were to flop, those countries would already experience a meaningful negative wealth effect. On the other hand, for the US it is very low at 0.17 per cent,” the report warns.
By ‘those countries’ the bank means countries with the largest bitcoin holdings as a percentage of GDP.
Citi analysts rank Kenya among countries with the largest bitcoin holdings in the world, in Russia leads by (five per cent), New Zealand and Nigeria (four per cent), followed by Ukraine, Kenya, South Africa, the UK and Colombia in that order.
In the report released last week, Citi estimates Kenya bitcoin holdings are approximately 2.3 per cent of the gross domestic product (GDP) or the annual national output.
Kenya’s GDP as of 2016 stood at Sh7.1 trillion, hence the holdings stand at about Sh163.3 billion or half of the construction budget of the Mombasa-Nairobi standard gauge railway (SGR) if converted in monetary terms.
The Citi study reveals a rising popularity of the virtual currency in Kenya despite regular warnings by regulators including Central Bank of Kenya (CBK), citing a lack of legal backing.
The CBK has insisted that it should not “be held liable for any losses” incurred by consumers using digital currencies to settle transactions, as the digital currency is not a legal tender in the country.
However despite the warning, cryptocurrencies have taken a life on it own all over the world and it is slowly being accepted as a legitimate investment and currency by even traditional banks as well.
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