One of the challenges the startups will have to deal with is the fact that in markets like Kenya, physical property trumps virtual property. People prefer land, cars or any tangible property. So the digital nature as well as the volatility of bitcoin may pose marketing challenges.
"Yes, land and property are hot in East Africa," Kimani acknowledged. "There has been additional interest from young people in trading bitcoins, or as a new asset class, however, it is still early on this front."
Regulatory issues dogged M-Pesa during its early years, when banks demanded that telcos should meet banking requirements set by the Central Bank of Kenya because they were handling deposits and withdrawals. Telcos managed to win that war but it is not clear if any regulatory hurdles will be imposed on bitcoin startups.
Under Kenyan regulations, banks are required to have certain deposits with the Central Bank of Kenya, which depend on the class of service, for example, microfinance or full-fledged bank offerings. A bank is also required to have disaster recovery and data centers and keep client data like residence, contacts etc. This was the original fight between banks and Safaricom but the regulator decided since the telcos don't keep the money or take deposits, they are exempted from banking regulations.
Meanwhile, bitcoin companies are banking on low transaction fees, speed of transaction and the large payments market in Africa to grow their businesses. Remittance companies like Western Union and Money Gram have high exchange rates, which discourage cross-border payments. Bitcoin is hoping to change that with its 3 percent charge on the transaction.
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