Why Small Businesses in Kenya Are Embracing Bitcoin and Cryptocurrencies
Kenya’s small businesses are turning to cryptocurrencies such as Bitcoin and stablecoins like USDT to navigate economic challenges, including dollar shortages and the depreciating shilling.
This trend is reshaping the country’s financial landscape and underlining the growing importance of digital currencies in international trade.
The Rising Need for Alternative Payments
According to a survey commissioned by the International Monetary Fund (IMF), small businesses are increasingly using cryptocurrencies to pay foreign suppliers when access to U.S. dollars is limited.
The Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK) collaborated on the study, revealing a shift in payment methods driven by necessity rather than choice.
“Stablecoins such as USDT have become a lifeline for many domestic firms dealing with international contracts, especially during periods of dollar shortages,” the IMF report states.
Stablecoins, pegged to fiat currencies like the U.S. dollar, offer businesses a way to sidestep volatility and maintain predictable transaction values. For Kenyan entrepreneurs, this stability is vital in managing costs and ensuring consistent operations.
Hedging Against the Shilling’s Depreciation
Beyond facilitating payments, cryptocurrencies serve as a hedge against the Kenyan shilling’s weakening value. Over the past two years, the shilling has lost more than 40% of its value against the dollar, creating uncertainty for businesses reliant on imports.
“Private sector actors are increasingly using stablecoins not just as payment tools but as stores of value to counter the effects of the shilling’s depreciation,” the IMF report highlights.
This dual functionality has made cryptocurrencies attractive to small business owners who might otherwise struggle to preserve their capital or meet international financial obligations.
Cryptocurrency Adoption by Individuals and Small Firms
The survey also sheds light on the broader adoption of cryptocurrencies in Kenya. The typical cryptocurrency user is under 40 and invests less than KSh 100,000 in digital assets like Bitcoin, Ethereum, and USDT.
For both individuals and businesses, the primary motivations are hedging against currency depreciation and facilitating international transactions.
Small businesses, in particular, are leveraging digital currencies to bypass traditional banking restrictions. Despite a CBK directive barring banks from dealing with cryptocurrency-related transactions, companies have found ways to access crypto platforms, fueling its adoption.
Economic and Regulatory Implications
Kenya’s burgeoning crypto market has caught the government’s attention. In 2023, the Kenya Revenue Authority (KRA) collected KSh 10 billion in taxes from cryptocurrency users, marking a milestone for the unregulated sector.
Meanwhile, regulatory efforts are underway. The CMA and CBK have been tasked with studying cryptocurrency adoption and developing guidelines to balance innovation with consumer protection.
Global Standing and Future Prospects
Kenya ranks 21st globally in cryptocurrency adoption, according to blockchain analytics firm Chainalysis. This global recognition reflects the deep integration of cryptocurrencies into Kenya’s economy, particularly among small businesses seeking financial resilience.
As the shilling continues to face pressure and dollar shortages persist, the reliance on cryptocurrencies by small businesses is likely to grow. For many, Bitcoin and stablecoins represent not just an alternative but a necessity in navigating an unpredictable economic landscape.
