In 2015, the High Court of Kenya issued a landmark judgment in the case of Lipisha Consortium Limited & another v Safaricom Limited, which had significant implications for the regulation and classification of crypto assets in Kenya. This ruling, delivered by Justice Joseph Onguto, had far-reaching consequences for companies operating in the crypto asset space, particularly in the realm of money remittance services using Bitcoin.
In this article, we explore the details of the Lipisha Consortium and Bitpesa case, the court’s judgment, and its implications for the crypto asset landscape in Kenya.
The Parties Involved
The case involved two petitioners: Lipisha Consortium Limited (the 1st Petitioner) and Bitpesa Limited (the 2nd Petitioner). The respondent in this case was Safaricom Limited, Kenya’s largest telecommunications provider. Bitpesa aimed to disrupt traditional remittance payments by utilizing Bitcoin as a medium for cross-border transactions, while Lipisha provided services to third parties, including Bitpesa.
Safaricom’s Suspension of Services
At the core of the dispute was Safaricom’s decision to suspend the services provided to Lipisha, which indirectly affected Bitpesa as well. Safaricom cited that Bitpesa was engaging in money remittance services using Bitcoin without the requisite license from the Central Bank of Kenya (CBK). The suspension was grounded in the belief that Bitpesa’s activities constituted an illegality due to the lack of proper authorization.
Interpretation of the Commercial Agreement
The court delved into the commercial agreement between Lipisha Consortium and Safaricom, revealing that Safaricom had the authority to suspend services without prior notice and for any valid reason. Justice Joseph Onguto emphasized that the suspension did not equate to termination, further validating Safaricom’s actions based on the agreement’s terms.
Central Bank of Kenya’s Position
The CBK played a significant role in this case as it had previously determined that Bitpesa, as a Bitcoin-based service, could not describe its offerings as “money remittance” or “money transfer.” The CBK also asserted that it did not regulate virtual currencies.
Safaricom’s Concerns
Safaricom argued that it was justified in taking action to protect its own license from being questioned or jeopardized, as long as the CBK had not clarified the regulatory framework for crypto assets in Kenya. Among its concerns was Bitpesa’s compliance with anti-money laundering (AML) requirements, which Safaricom contended had not been met.
The Court’s Ruling
The High Court of Kenya upheld Safaricom’s suspension of services, agreeing that Bitpesa had been operating a money remittance business using Bitcoin without the necessary authorization from the CBK. The court determined that Safaricom’s actions were in compliance with the commercial agreement and safeguarded its interests as a licensed financial services provider. In essence, the court supported Safaricom’s stance, upholding the termination of services to Bitpesa and Lipisha.
Implications of the Lipisha Consortium and Bitpesa Case
The Lipisha Consortium and Bitpesa case set a precedent by classifying Bitcoin as representing monetary value in Kenya. This categorization has significant implications for the regulation of crypto asset-related services. Companies dealing with crypto assets in Kenya must seek regulatory approval, particularly when engaged in money remittance services. This ruling serves as a foundational precedent for potential sanctions by the Central Bank of Kenya against crypto asset businesses operating without proper authorization.
While the Lipisha Consortium and Bitpesa case was specific to a particular set of circumstances, it underscores the importance of regulatory compliance and the evolving landscape of crypto asset regulation in Kenya. As the crypto industry continues to develop, Kenya and other nations will likely see further legal and regulatory developments in this space. This case remains a noteworthy chapter in the ongoing story of crypto assets in the country.
