Bitcoin v M-Pesa: legal digital payment battle in Kenya

On 14th December, a high court in Kenya will deliver a preliminary decision on the significant legal battle between mobile currency providers and Safaricom, the nation's dominant telecoms service, which operates M-Pesa, the most successful digital money service in the developing world. The case ruling will help to shape the payments industry in one of the emerging markets' most promising countries for new digital payments technologies. BitPesa, the Bitcoin payments and remittance company, and Lipisha, the payment gateway for both BitPesa and M-Pesa, are suing Safaricom, according to the International Business Times. Safaricom stopped Lipisha from processing BitPesa transactions and later reinstated access only on the condition that it terminated its relationship with BitPesa. Lipisha and BitPesa claim Safaricom has no legal right to enforce this. Safaricom says that BitPesa does not meet anti-money laundering requirements, a claim BitPesa denies.

Tuesday, December 1, 2015

On 14 December, a high court in Kenya will come to a preliminary decision in a battle between Bitcoin remittance and payments company BitPesa, which is suing Safaricom, the telecom company which operates M-Pesa. Also suing is Lipisha, the payment company that gateways BitPesa and M-Pesa.

Safaricom had stopped Lipisha processing M-Pesa transactions, freezing monies pertaining to Lipisha transactions in its accounts – apparently the payment handler was notified by way of a text message. Safaricom later reinstated Lipisha’s access, but only did so on the condition that Lipisha terminate its relationship with BitPesa, giving Lipisha only one hour to decide. Lipisha and BitPesa claim Safaricom has no legal right to do so and is infringing upon “rights to acquire and own property, fair administration and economic interests”.

Safaricom says BitPesa does not meet the grade regarding anti-money laundering requirements, invoking the need for a licence to be able to connect to its customers. Under the auspices of Lipisha, BitPesa converted its customers’ bitcoins into Kenyan shillings and sent them to recipients’ M-Pesa. It is unclear exactly how, or by whom, AML rules will be enforced in this case. In the meantime, transactions between the platforms remain suspended.

Bitpesa told IBTimes UK: “BitPesa has implemented AML/KYC policies that comply with Kenyan legal and regulatory requirements. We have freely submitted them to the Central Bank of Kenya, as well as regulators in other jurisdictions in which we operate. We hold ourselves to the highest standards when it comes to AML/KYC compliance.

“As we have detailed in our court filings, the Central Bank of Kenya has informed us that we fall outside its money transmission and money remittance regulations. Safaricom cannot demand that BitPesa produce a licence from the Central Bank that the Central Bank itself considers inapplicable to BitPesa’s business.”