How an African startup built a bitcoin network while crypto's reputation crumbled

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When jobs in banking dried up after the global economic crash in 2008, Elizabeth Rossiello went to work in Africa at several microfinance operations, where she saw firsthand how Kenya’s recently launched M-Pesa mobile money service was transforming payments.

Then, Rossiello heard that cryptocurrencies would be the next big thing. In 2013 she founded BitPesa, a digital foreign exchange and payments platform based in Nairobi. And while she benefited from the initial craze around bitcoin and blockchain, her company also shares bitcoin's reputational wounds as the cryptocurrency faces more regulatory backlash and pricing volatility.

“It can be frustrating, because this technology is new and the media is riding the waves of excitement and collapsing optimism based on its price, while every day we’re over here demonstrating industrial use cases for bitcoin and blockchain,” Rossiello said.

Nevertheless, growth has been solid—last month BitPesa expanded operations to Ghana, its ninth country—and it recently bought the Spanish online money service TransferZero.

BitPesa’s niche sets it apart from pure bitcoin operations, by offering a range of options for cross-border payments, accepting bank transfers and funds from licensed money transfer operators, in addition to bitcoin. Its platform blends mobile money, blockchain technology and bitcoin acceptance for cross-border business-to-business transactions.

In certain cases, bitcoin offers an elegant solution for businesses in Africa making purchases from foreign suppliers in their own currency with its blockchain approach cutting out several intermediaries, Rossiello explained.

One example she gave is an African company that wants to import Japanese car parts from a vendor that wants to get paid in yen.

“Typically you’d need a foreign counterparty to assist in that kind of transaction, but BitPesa lets businesses use bitcoin or another currency to buy those supplies and avoid going through a foreign cash window,” Rossiello said. “Customers can now do large transactions during African trading hours, where previously they had to operate on the schedule of brokers in other countries, which also don't recognize African holidays.”

BitPesa’s cloud-based API enables seamless integration with partners, and with a U.K.- authorized payment institution license since 2015, the company has the flexibility to take funds from licensed money transfer operators in bitcoin or hard currencies and pay out through a network of local companies and banks in African currencies, to either bank accounts or mobile money accounts, Rossiello said.

Typical B-to-B payments for BitPesa’s customers include payroll and treasury payments and supplier payments and reimbursements.

“As global e-commerce expands, businesses in Africa need more options to payments in different currencies,” Rossiello said.

Bitcoin is a key currency in the mix for African businesses, filling gaps in the local payments acceptance landscape.

For example, credit cards are seldom accepted in Africa, creating significant challenges for e-commerce or other transactions, including booking and paying for airline flights and hotels. “Booking travel is tough, because you can usually only pay with cash, and sometimes you have to use international wire transfers or PayPal, and it can take days for transactions to clear,” Rossiello said.

BitPesa solves a similar problem for businesses using bitcoin to make one-time payments to foreign suppliers, she said.

From its beginning with seed money from a local investor, BitPesa has amassed $10 million in individual funding rounds from private investors, and plans to look at additional acquisitions to expand its global reach.

What Rossiello foresees is bitcoin eventually finding its place within traditional finance as a useful tool instead of the centerpiece of payment solutions, but currently the cryptocurrency is clouded by confusion.

“A lot of people don’t understand cryptocurrencies, and many traditional payment institutions are being pressured not to use or accept bitcoin, which is a shame. Although it’s still very early in its evolution, bitcoin already is proving it’s a useful complementary technology to existing approaches,” she said.

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Bitcoin Cross border payments Compliance Africa U.S.