March last year is a month Carol Maina, who had lost her job towards the end of February, would rather forget.
Unable to come to terms with the shock sacking that left her mentally and physically drained, the mother of three fell for an online trap where she lost what would have cushioned her against the turbulent economic period.
“I had saved Sh4.2 million. Someone knew I had lost a job, so he connected me to people who said they were cryptocurrency traders. They convinced me to splash Sh3 million to buy something they called Bitcoin,” Carol narrates.
She says the ‘Bitcoin gurus’ had convinced her that within two weeks, she would have had a 50 percent profit, but ended up losing all the cash.
“My plan was to withdraw all the money if I got Sh1.5 million on top of my Sh3 million. I would use Sh2 million of the Sh4.5 million to invest in an online cloth business,” the 38-year-old Lang’ata resident recalls.
Carol’s story is similar to those of hundreds of Kenyans who have called the Nation during the Covid-19 pandemic, recounting how they have lost their savings to cryptocurrency scammers.
“Anything that has characteristics of Ponzi, a high yield investment programme where they ask you to invest your money and earn some amounts daily or weekly should be avoided,” warns George Mwakisha, business development manager for Kenya at Chinese cryptocurrency platform Binance.
Despite a government advisory by the Central Bank of Kenya against use of cryptocurrencies by citizens, more Kenyans have used the stay-at-home directives to try their luck in the crypto market, but not all have a success story to tell.
“I can’t believe I lost Sh90,000. Money meant for rent, school fees and home shopping to invest in a field I knew nothing about,” says Joel Ondieki, a father of two who resides in Umoja.
Nairobi-based author of Understanding the Blockchain Benjamin Arunda told Smart Business that the rate at which Kenyans are being scammed has soared, with Bitcoin’s price appreciating more than 1200 percent since March 2020. “Ninety percent of my crypto clients, who consult me on how to invest, are people who have been scammed or a person they know has been scammed. Kenyans are hungry to make quick extra income, and this makes them vulnerable to get-rich-quick schemes,” he discloses.
He says Kenyans fall prey to huge promises of profits from third parties because they have neglected to seek knowledge on blockchain and crypto trade.
“For example, the case of Kennicoin, which scammed Kenyans especially in the rural areas of Central Kenya capitalised on uninformed Kenyans in the villages. If Kenyans can be wise enough to seek knowledge first, they can escape most scam traps,” he remarks.
Scams have thrived on gaps in digital financial literacy, as they promise to guarantee returns and tend to have highly persuasive models of risk-free investment which is never realistic even with conventional investments.
According to Betty Wambugu, whose café in Nyeri town accepts crypto payments, Kenya’s youth, who are unemployed or earn little, embark on crypto trading due to its flexibility where they can trade from anywhere, anytime.
“Before investing their hard earned money, let them invest in education through verified online platforms or subscribing to online courses,” she advises.
Kenya’s elite class seem to have a soft spot for crypto business because they have seen it rise despite regulatory hindrances.
“What Kenyans should know is that the person who holds your wallet’s private keys is the owner of the crypto, so insist on holding your private keys. That can only happen if you learn first before you invest,” says Mr Arunda.
Last year alone, despite the economic hardships caused by the pandemic, a survey by African crypto marketplace firm Paxful indicates that there was more Bitcoin trading in Kenya than ever before, with trade volumes reaching Sh5.1 billion, a 472 percent increase from 2019.
“Kenya has traded a total of 5,895 Bitcoins between 2015 and 2020, with Nigeria exchanging Sh63.15billion worth of Bitcoin in 2020. South Africa is third at Sh2.1billion with Morocco fourth at 229.8 million,” Paxful data shows.
According to the Mastercard New Payments Index published last week, many Kenyans are now ready to buy, sell and trade not only Bitcoin but also other digital currencies such as Ethereum, Binance Coin, Bitcoin Cash, Litecoin and Ripple.