Kenyan Court Upholds Bid to Keep Bitcoin Startup Off M-Pesa

A Kenyan High Court judge has ruled that M-Pesa operator Safaricom will not be required to grant access to bitcoin startup BitPesa amid an ongoing legal dispute.

The move comes after the mobile payments firm Lipisha, along with BitPesa, asked the High Court of Kenya for a preliminary order that would enable access while their petition against Safaricom is being considered.

As reported last month, BitPesa lost access to M-Pesa in mid-November when its payments gateway partner Lipisha had its account suspended by Safaricom. BitPesa had used Lipisha as a way to offer M-Pesa as a payment option to Kenyan bitcoin buyers.

Court documents obtained by CoinDesk show that Judge Joseph L Onguto sided with Safaricom in the new ruling, dated 14th December, stating that Safaricom had grounds to suspend Lipisha's account based on the contract between the two companies and concerns it would lose its money transmission license due to BitPesa's work with bitcoin.

Notably, Judge Onguto weighed in on whether BitPesa’s business would fall under the definition of a money transmission company, stating:

"Suffice however to state now that when [BitPesa] states it is engaged in the business of accepting bitcoin from various countries of the world and exchanging it for local African currencies including but not limited to the Kenya shilling, then in my preliminary view the 2nd Petitioner is engaged in money remittance business."

Onguto pointed to correspondence submitted to the Court showing that, in the view of the Central Bank of Kenya, BitPesa's use of bitcoin meant that "it could not use the words 'money remittance' or 'money transfer'". At the same time, he highlighted a 2014 notice from the central bank stating that it does not regulate virtual currency activity.

"The petitioners agree, while the respondent does not," he said, going on to state that the matter should be explored more thoroughly in a future hearing.

BitPesa declined to comment on Onguto’s comments regarding money transmission, but the company told CoinDesk that it supports the ruling and is working with a firm called Airtel Money to offer services in Kenya as the case proceeds.

"We are pleased with the High Court's ruling, which permits BitPesa to continue to fight Safaricom's wrongful and unlawful bullying," BitPesa said in a statement. "The Court has not dismissed BitPesa's case, but rather has ruled only that BitPesa is strong enough as a company that it does not require access to M-Pesa to survive during the course of the case."

The firm said that it is exploring next steps with its legal counsel and declined to comment further. A Safaricom representative was not immediately available when reached.

The ruling comes as the Central Bank of Kenya released a new advisory regarding digital currencies like bitcoin, stating that they are not considered legal tender – a publication that BitPesa suggested could emerge as a result of the case.

The central bank stated that "no entity is currently licensed to offer money remittance services and products in Kenya using virtual currency such as bitcoin".

"CBK reiterates that bitcoin and similar products are not legal tender nor are they regulated in Kenya. The public should therefore desist from transacting in bitcoin and similar products," the central bank said.

The full ruling can be found below:

Ruling

Kenyan shillings image via Shutterstock