Option 7: Crypto

Cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) are digital assets recorded on public blockchains. Kenya has one of the highest rates of crypto awareness in Africa, and also many crypto scams. This lesson explains the basics, how Kenyans typically buy and sell, and the serious risks.

1. What it is

Ways people engage with crypto:

• Long-term holding of a small amount ("HODL")
• Spot trading: buying and selling coins for short-term price moves
• Derivatives: leveraged futures and perpetual contracts on exchanges (very high risk)
• Using stablecoins for payments or receiving freelance income (check costs and rules carefully)

2. How it works: example

You buy KSh 5,000 of Bitcoin on an exchange through its P2P market (another user sells you USDT for M-Pesa, held in escrow by the exchange), then swap USDT for BTC.

• BTC rises 20% → about KSh 6,000, minus fees.
• BTC falls 40% (crypto has had falls of 50–80% in past bear markets) → about KSh 3,000.

3. Buying, selling and storing in Kenya

• Exchanges (international and regional) with P2P trading, where users buy and sell with M-Pesa or bank transfers. The exchange holds the crypto in escrow until the seller confirms payment.
• Custodial accounts: the exchange holds your coins (convenient; you depend on the exchange).
• Self-custody wallets: you hold the private keys/seed phrase (more control; if you lose the seed phrase, the money is gone forever; if someone steals it, they take everything).

4. Costs

Exchange trading fees, P2P price spreads (the M-Pesa rate vs the market rate), network (gas) fees for transfers, withdrawal fees, and funding/interest on leveraged positions.

5. Risk level: very high

• Extreme volatility: large falls happen often and quickly.
• Exchange risk: exchanges have collapsed, been hacked or frozen withdrawals (the 2022 FTX collapse is a famous example).
• P2P fraud: fake M-Pesa confirmation messages, chargebacks, or receiving money from scam victims, which can lead to frozen accounts and police involvement.
• Irreversible transactions: sending to a wrong or scam address can't be undone.
• Leverage on crypto derivatives makes losses even faster.
• Scam tokens and "rug pulls" (developers disappear with investors' money).

6. Regulation in Kenya

Kenya passed legislation in 2025 to regulate virtual asset service providers (exchanges, wallet providers and others), with roles for the CBK and the CMA. Rules and licensing are being implemented, so check the current status and whether a platform is licensed before using it. Crypto gains may be taxable; keep records and confirm with KRA (money and tax).

7. Who it may suit / who should avoid it

• May suit: people who understand the technology and risks and want a small long-term position (money they can afford to lose), stored securely.
• Avoid: using rent or loan money; leveraged crypto trading as a beginner; "investment" groups promising returns; meme-coin gambling.

8. Safe practices

1. Use reputable platforms (check licensing status and security track record); turn on 2FA with an authenticator app.
2. In P2P trades, check your actual M-Pesa balance/statement, not SMS screenshots, before releasing crypto; trade only with verified, well-reviewed counterparties; keep everything inside the platform's chat.
3. Start with small amounts; test small transfers before large ones.
4. Learn how to use self-custody before moving large amounts; back up the seed phrase on paper, stored safely.
5. Never invest because of FOMO or social media hype.

9. Red flags and scams

• "Crypto investment" groups or "account managers" with daily or weekly fixed returns (often Ponzi schemes)
• Mining "packages" and cloud-mining apps paying daily profits
• Romance or friendship contacts introducing a "special trading app"
• Airdrops or support messages asking for your seed phrase or to "connect your wallet" to unknown sites
• New tokens promoted with guaranteed 100x returns
• Requests to pay "tax" or "unlock fees" to withdraw

Verdict

Crypto is a new, highly volatile and risky asset class with real technology behind some projects and a huge amount of speculation and fraud around it. If you participate, keep it a small part of your money, use secure practices and regulated platforms where possible, and avoid leverage and "investment schemes" entirely.

Check yourself

1. What is the name of the first cryptocurrency? (one word)

   Show answer

   Bitcoin

2. What should you never share with anyone because it controls your wallet? (two words)

   Show answer

   seed phrase

3. In a P2P trade, should you trust an M-Pesa SMS screenshot or check your actual balance?

   Show answer

   actual balance

4. What type of token is designed to track the US dollar? (one word)

   Show answer

   stablecoin