NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

As the role of bitcoin and other unregulated digital currencies grows, the Central Bank of Kenya has joined other authorities from around the world to warn that virtual money is insecure and could be used to fund terrorism.

The Central Bank has linked the use of bitcoin and other illegal tenders in Kenya to terrorism and money laundering due to the untraceable nature of their transactions.

The CBK has also warned that the digital money platforms expose users to potential losses due to lack of underlying or backing of assets and the value of the virtual currencies.

In a public notice, the bank described itself as the sole regulator of currencies in the country.

“Domestic and international money transfer services in Kenya are regulated by the Central Bank of Kenya Act and other legislation. In this regard, no entity is currently licensed to offer money remittance services and products in Kenya using virtual currency such as Bitcoin,” said the notice.

The move comes a day after a High Court judge issued a preliminary ruling that telecoms operator Safaricom will not be ordered to reinstate Bitpesa’s access to the M-Pesa mobile money service.

Safaricom said BitPesa, with whom it shares a partner, did not meet its anti-money laundering requirements.