Title: Kotani Pay: Revolutionizing Cross-Border Remittances in Africa through Cryptocurrency
Introduction:
Cryptocurrencies have emerged as a transformative technology, promising financial inclusion for underserved populations around the world. Kotani Pay, a crypto payments startup based in Nairobi, is on a mission to facilitate cross-border remittances for Africa’s vast unbanked populations. By leveraging blockchain technology and stablecoins, Kotani Pay aims to reduce the high transfer fees and challenges faced by traditional methods of money transfer in the African continent.
Expanding Financial Inclusion:
Kotani Pay recognizes the significant impact of remittances on the African economy, with some countries seeing remittances contribute up to 20% of their GDP. However, the high transfer fees associated with traditional remittance methods pose a major hurdle for individuals and families. With an underdeveloped banking system, lack of information symmetry, and currency fluctuations, many African families face difficulties in accessing and transferring funds. Kotani Pay aims to address these challenges by utilizing stablecoins, which are cryptocurrencies pegged to fiat currencies like the US dollar, to facilitate cost-effective international money transfers.
The Role of Blockchain and Stablecoins:
Kotani Pay’s innovative solution lies in its use of blockchain technology and stablecoins. By harnessing the power of blockchain, Kotani Pay ensures secure and transparent transactions, eliminating the need for intermediaries. Stablecoins further enable Kotani Pay to bypass the volatility associated with traditional cryptocurrencies, providing stability and ease of use for users. This allows individuals to transfer money internationally at a fraction of the cost incurred by traditional methods.
Introducing Middleware for Local Currency Conversion:
To facilitate the conversion of stablecoins into local currencies and enable seamless transactions, Kotani Pay has developed middleware that connects blockchains with local payment networks. This middleware utilizes a protocol called Unstructured Supplementary Data Service (USSD), which enables users to send money using basic phones without internet access. By leveraging this technology, Kotani Pay ensures that individuals can easily cash out their stablecoins and make payments in local currencies, even in regions with limited internet connectivity.
B2B Solution and Crypto Partnerships:
Kotani Pay offers its technologies as a business-to-business (B2B) solution, enabling seamless integration between crypto platforms’ smart contracts and mobile money application programming interfaces (APIs). The startup has forged partnerships with several prominent crypto and financial organizations, including Yellowcard, DCG, Fonbank, Celo’s Valora, Mercy Corps, UNICEF Crypto Innovation Fund, and Stellar. These partnerships further strengthen Kotani Pay’s position as a leading player in the crypto payments space in Africa.
Expansion Plans and Future Developments:
After successfully closing a $2 million seed funding round, Kotani Pay plans to expand its operations to Rwanda, Senegal, Ivory Coast, Tanzania, and Nigeria. The startup aims to tap into the large unbanked populations in these countries, leveraging its technology to bring financial inclusion and affordable cross-border remittances. Furthermore, Kotani Pay intends to introduce additional products such as Reconset, a reconciliation-as-a-service offering, and Money Ledger, a Ledger-as-a-Service solution, following its acquisition of the Nigerian startup, Fuhlstack.
Navigating Regulatory Challenges:
As a business venturing into the realm of cross-border remittances and cryptocurrencies with the potential to impact foreign exchange reserves, Kotani Pay acknowledges the need to comply with regulations. The startup works closely with local mobile money operators and abides by regulated partner charters to ensure compliance. Moreover, Macharia, the founder of Kotani Pay, highlights the positive regulatory developments in Africa, citing initiatives such as virtual asset service provider licenses in countries like Botswana, Mauritius, and South Africa. Additionally, he mentions the European Union Parliament’s approval of MiCa, which regulates stablecoin issuers, on-ramps, off-ramps, and exchanges.
Conclusion:
Kotani Pay’s innovative use of blockchain technology and stablecoins is revolutionizing cross-border remittances in Africa, providing affordable and efficient solutions to the challenges faced by traditional methods. By leveraging the power of crypto payments and partnerships with industry leaders, Kotani Pay aims to bring financial inclusion and empower underserved communities in Africa. With an expanding presence and a focus on compliance, this startup is poised to make a significant impact on the African economy.
Summary:
Kotani Pay is a crypto payments startup based in Nairobi that aims to bring financial inclusion to Africa’s unbanked populations through cross-border remittances. By leveraging blockchain technology and stablecoins, Kotani Pay facilitates cost-effective international money transfers, addressing the high transfer fees associated with traditional methods. With its middleware connecting blockchains with local payment networks and partnerships with key players in the crypto industry, Kotani Pay ensures seamless conversions between stablecoins and local currencies. The startup plans to expand its operations to multiple African countries and will introduce additional products such as reconciliation and ledger-as-a-service solutions. Despite regulatory challenges, Kotani Pay remains positive about the regulatory developments in Africa, which will further advance the use and acceptance of cryptocurrencies and digital assets in the region.
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Of the many lofty promises of cryptocurrencies, one of the most laudable is its potential to bring financial inclusion to underserved users. Based in Nairobi kotani Pay is a crypto payments startup with a vision to facilitate cross-border remittances for Africa’s large unbanked populations.
The two-year-old startup is targeting a use case that affects the livelihoods of hundreds of millions of people, including in Kenya, Ghana, Zambia, and South Africa. The startup, which has closed a $2 million seed funding round led by P1 Ventures, with the participation of various investors, including DCG/Luno and Flori Ventures, plans to further expand to Rwanda, Senegal, Ivory Coast, Tanzania and Nigerian.
According to the world Bank, the sub-Saharan region will receive approximately 55 billion dollars in remittances this year. In some African countries, remittances represent up to 20% of GDP, according to statistics from the United Nations.
Despite their key role in the African economy, remittances face an insurmountable challenge: high transfer fees. In some countries, the cut can be up to 20% of the transferred amount. Various factors have led to exorbitant costs, including an underdeveloped banking system, information asymmetry, and currency fluctuations. In many cases, families in the country of origin do not have bank accounts or even official identification to open one.
Recognizing these obstacles in the traditional method of transferring money, Kotani proposes the use of blockchain to facilitate remittances to Africa. Specifically, he is taking advantage of stablecoins, which are cryptocurrencies pegged to fiat currencies like the US dollar, to move money internationally at a fraction of the costs of the old method.
Then, to cash out the stablecoins one has in their mobile wallets and pay for things in local currencies, Kotani has created middleware that connects blockchains with local payment networks, many of which allow users to send money on basic phones without internet. through communication. called protocol Unstructured Supplementary Data Service (USSD), as this demo shows:
Kotani offers its technologies as a B2B solution, connecting the smart contracts of crypto platforms on the one hand and mobile money APIs on the other. Some of its top crypto partners include Yellowcard, DCG, Fonbank, Celo’s Valora, Mercy Corps, UNICEF Crypto Innovation Fund, and Stellar.
Kotani also allows users to “drop in” or convert their local currencies to USD, a solution that is more suited to enterprises at the moment but could be opened up to retail users in the future with the required licenses, the founder said. The process is enabled by a “network of liquidity providers through partnerships with local currency services and money transfer operators from whom we source local dollars,” according to the co-founder.
Most of the transfers that are made in Kotani ($23 million to date) are incoming payments. Given its business focus, the platform’s average transaction size is $150,000. Like other payment infrastructure providers, Kotani monetizes through an interchange fee, which averages around 1% of gross transaction volume, according to Macharia.
The startup will introduce other products, including Reconset, a reconciliation-as-a-service offering, and Money Ledger, a Ledger-as-a-Service solution, after acquiring Fuhlstack, a Nigerian startup. Fuhlstack founder Lemuel Okoli joins Macharia and Samuel Kariuki as co-founders of Kotani Pay.
crypto regulation
With a business that can potentially tip the balance of foreign exchange reserves, Kotani is likely already on the radar of regulators. Macharia acknowledged that the central banks of the countries where the firm operates already “monitor these transactions while supervising all termination points of mobile money and banking services.”
“We either work directly with local mobile money operators or we abide by regulated partner charters to ensure our operations are compliant,” he continued, adding that “central banks are actually getting excited about some of these cases. of use and are getting involved in the development of central bank digital currencies.”
The regulatory landscape for cryptocurrencies is changing rapidly, reducing investor confidence in some regions like the United States and creating positive sentiment in others like Asia. In general, Macharia feels “positive” about regulatory developments on the continent.
“We are seeing positive developments in the southern part of Africa: Botswana, Mauritius and South Africa are launching virtual asset service provider licenses that regulate digital asset fintechs. MiCa approved by the European Union parliament is another positive development as it regulates stablecoin issuers, on-ramps and off-ramps and exchanges,” he said.
“Based on our engagement with Kenyan regulators such as the Capital Markets Authority, we believe it is only a matter of time before other markets such as Kenya, Ghana and Nigeria catch up.”
Kotani gets $2M pre-seed to help African workers send money home via crypto — without the internet
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