Kipochi, an African online service launched this month, is looking for a way to connect the digital currency Bitcoin to M-Pesa, Kenya's widely-used mobile payments system.

Bitcoin, a decentralized virtual currency, was designed outside the scope of mainstream financial services and has run into some issues as U.S. regulators take notice. It may see wider adoption in other countries, where the regulatory environment might be more permissive.

Kipochi's service allows users to buy bitcoins using M-Pesa, which was launched in 2007 by Kenyan mobile operator Safaricom Ltd. and the U.K.'s Vodafone Group plc. M-Pesa allows users to use a mobile phone to send funds to consumers and merchants. About a third of Kenya's 44 million citizens use the service.

While M-Pesa works only in Kenya, Kipochi could allow Kenyans to use bitcoins to quickly receive funds from outside the country at a low cost, says Pelle Braendgaard, founder of Kipochi, in a July 11 article on Kipochi did not respond to an interview request from PaymentsSource by deadline.

Many Bitcoin enthusiasts say the digital currency could see more success in countries where the banking infrastructure is not well developed and the regulatory environment could not be as burdening.

Coinapult, a company that allows consumers to send bitcoin transfers to email addresses or mobile phone numbers, took its operations to Panama to focus on non-U.S. customers without dealing with the constraints of U.S. regulation. 

"The developing world has a much larger incentive to adopt Bitcoin than say the average American with a credit or debit card or PayPal account," says Gabe Sukenik, executive director at Coinapult. "In the U.S., Bitcoin is nifty; in Africa, it's necessary."

Remittance is one of the digital currency's valuable use cases, since bitcoins can be sent across borders quickly and for little to no fee.

Kipochi is free to use and, according to, the company has no plan for making money. Kipochi is intended to spur adoption and use of bitcoin in developing countries, said Braendgaard in the article. The entrepreneur is also working on a Bitcoin-related system for merchants called Soko.

M-Pesa came about to make money transfers safer and less expensive in Kenya. Because most citizens still use cash, they'd have to either purchase a wire transfer or travel to give cash to a recipient in-person.

"Bitcoin is closer to digital cash than M-Pesa is," Sukenik says.

The regulatory environment in Kenya will likely be more permissive than in the U.S.

In March, the Financial Crimes and Enforcement Network issued guidance on virtual currency, explaining that Bitcoin exchanges and administrators should register as money services businesses. The guidance also suggest that states view Bitcoin companies as money transmitters, requiring state-by-state licensing. This licensing process can cost more than $10 million, according to one estimate.

"Different countries are going to have different levels of regulation," Sukenik says.

Kenya's Financial Reporting Centre (FRC) recently commented on Bitcoin in a Daily Nation article about Kipochi.

"Unless something is legal tender, it does not fall within our mandate," says Jackson Kitili, head of the FRC, in the article. "Every sovereign state issues its own currency. Unless this currency is legal tender, we cannot really start talking about money laundering."

Authorities in Canada and Finland have made similar statements.

Bitcoin-related businesses are going to start leaving the U.S. for countries with more Bitcoin-friendly legislation, says Sukenik.

"The payment industry is used to charging per transaction," Sukenik says. "Bitcoin will flip that revenue model on its head."

Most Bitcoin companies charge for currency conversion, but once a consumer is in the Bitcoin system they're free to transfer bitcoins at no fee.

Kipochi's servers remove several steps from the process of obtaining bitcoins. The servers place the order for bitcoins at a local Bitcoin exchange. When the bitcoins are delivered to Kipochi's servers, the company credits the consumer's account. Kipochi then alerts the consumer via text message.

Kipochi is launching in a region that’s viewed by many U.S. and European companies as providing an opportunity for mobile payments because of M-Pesa’s success and the vast number of unbanked consumers.

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