Reginald Tumusiime (President of the Blockchain Association Uganda) discussed his organisation’s stablecoin project in Uganda at the London Blockchain Conference (21 – 23 May 2024). The KitePesa is a stablecoin project, which is pegged to the Ugandan shilling (UGX).
In his presentation, Tumusiime gave an overview of the project and introduced the audience to the monetary situation of Uganda and sub-Saharan Africa. Tumusiime’s presentation was followed by a fireside chat with Thomas Giacomo (Utilisation Director of the BSV Blockchain) which gave further in-depth insights into the KitePesa project.
Use of mobile money in Uganda
To highlight the feasibility and utility of the KitePesa stablecoin project, Tumusiime discussed the familiarity with digital cash in Uganda and sub-Saharan Africa. He mentioned a recent IMF study indicating that 75% of sub-Saharan African countries are exploring central bank digital currency (CBDC) projects, with 25% planning to implement digital cash systems by 2028.
He highlighted the widespread use of mobile money, which has a 64% service provision in Uganda. This includes privately issued money, backed 1:1 by fiat currency, facilitating transactions via mobile phones, even without internet access. Tumusiime outlines the significant market potential for mobile money in Uganda, currently valued at $100 billion and projected to reach nearly $1 trillion by 2032. This data comes from a study by the intragroup.
With 34 million registered users out of an estimated 50 million Ugandans, over 70% of the population already uses mobile money, primarily through the two major providers, MTN and Airtel. It has become the preferred method for financial transactions, surpassing cash pickups and bank deposits. It is widely used for bill payments, airtime top-ups, and peer-to-peer transfers.
Current pain points of mobile money in Uganda
While there are no fees for depositing cash via mobile money agents, transaction fees apply for sending money and making payments. Despite its popularity, the system faces challenges such as a minimum transaction limit of $0.13, occasional downtime, and technical issues. The KitePesa project aims to address these constraints and enhance the system’s efficiency and reliability by relying on the scalable BSV blockchain.
Tumusiime stressed that the KitePesa does not only represent another alternative to mobile money, but that it will impactfully extend its capabilities by introducing Web3 technology, enhancing efficiency, speed, and stability. He further highlighted that the project is easily replicable across sub-Saharan Africa.
The regulatory environment in Uganda
Tumusiime explained that Uganda has a strong regulatory framework for payment innovations, including stablecoin development. This stems from lessons learned during the transition from bank based money to mobile money, where regulation lagged behind significant market developments. The National Payment System Act now governs all payment innovations, including mobile money, providing a clear path for new projects.
Innovators can test their solutions in a regulatory sandbox, apply for a license, and operate legally. The current project aims to privately issue money using permissionless blockchain infrastructure, ensuring it doesn’t compromise the security or sovereignty of the central bank, which is crucial for regulatory approval and success.
Introducing KitePesa
Tumusiime highlighted the key advantages of their new solution over existing mobile money systems. While mobile money has significantly improved financial inclusion, their solution aims to offer lower transaction costs, better domestic interoperability (including smart contracts and traditional banks), and enhanced network reliability.
The name “KitePesa” combines “kite,” symbolising ease of movement, with “pesa,” a Swahili word for money, to reflect the project’s goal of enabling smooth financial transactions.
Tumusiime emphasises that KitePesa leverages proven digital cash concepts familiar in sub-Saharan Africa, like mobile money, but enhances them by using a permissionless blockchain infrastructure.
This infrastructure offers benefits such as faster transactions, scalability, enhanced security, and support for micropayments. It also enables innovative applications like smart contracts and tokenisation of assets.
Built on the BSVblockchain
KitePesa aims to facilitate easy money transfers, bill payments, and movement of funds among various market players. Thanks to the BSV blockchain, it can do this at significantly lower cost and reliably. Leveraging BSV’s capabilities, KitePesa allows for micropayments, enabling transactions as small as a thousandth of a dollar, and is built on resilient, scalable infrastructure capable of handling up to one million transactions per second.
The system will support programmable money, allowing for smart contracts and tokenisation of assets like real estate and precious metals. In this way, KitePesa is well ahead of other conventional forms of mobile money and provides users and service providers with many additional usage and application options.
