Trapped Between the State’s Iron Curtain and the Black Market: East Africa’s Mobile Money Giant

East Africa built the world’s most successful mobile money economy long before “tap to pay” went global. In China, internet platforms led a revolution of convenience. In East Africa, telecom operators did. Yet the same advantages that made mobile money ubiquitous—SIM‑based identity, agent networks, and tight integration with state infrastructure—now place the region’s mobile payment giants in a vise: greater government control on one side, and rapidly professionalizing fraud markets on the other. Against this backdrop, crypto and stablecoins are no longer a sideshow. They are becoming parallel rails for settlement, savings, and cross‑border commerce—if users can hold their own keys and if regulation allows compliant bridges.

The mobile money leviathan is evolving

For years, one brand was almost synonymous with digital cash in Kenya. That dominance is now eroding at the margins. New data from the Communications Authority shows M‑Pesa’s market share fell to 90.8% in Q1 2025, its sixth straight quarterly decline, as Airtel Money pressed an aggressive pricing and interoperability play. Mobile money subscriptions still grew to 45.4 million, an 86.6% penetration rate, underscoring the system’s scale even as competition stiffens. See recent coverage from TechCabal and TechTrendsKE for the underlying numbers and context: M‑Pesa’s market share drops for a sixth straight quarter and Kenya’s mobile money subscriptions hit 45.4 million.

Beyond Kenya, the playbook is expanding regionally. In Ethiopia—where mobile money is led by state‑owned Ethio Telecom’s Telebirr—Safaricom has secured the license to operate M‑Pesa and recently integrated with the national EthSwitch network to reach more than 15 banks and wallets, cementing interoperability under tight public oversight (Safaricom Ethiopia–EthSwitch integration; Safaricom M‑Pesa Ethiopia license).

The iron curtain: deeper state control and fragile infrastructure

• SIM‑centric identity enables inclusion—but also pervasive surveillance and sudden switch‑offs. Kenya’s regulator has repeatedly deactivated SIMs registered with wrong IDs and enforced mass re‑registration to “curb criminal misuse,” an approach that increases traceability across telecom and payments rails (CA Kenya update; Citizen Digital report).
• State digital portals can become single points of failure. Kenya’s eCitizen platform, which consolidates payments for thousands of government services, has suffered repeated outages, including a 30‑hour interruption in October 2025 that stalled business payments nationwide (The Star report on eCitizen outage). Cyberattacks previously contributed to downtime in mid‑2023 (CSK summary).
• AML pressure is intensifying. In June 2025, the European Commission added Kenya to the EU list of high‑risk AML jurisdictions, triggering enhanced due diligence for EU‑linked transactions (EC press release; Reuters coverage). Meanwhile, major peers like South Africa and Nigeria have been delisted from the FATF “grey list,” raising the bar for neighbors to demonstrate progress (FT coverage).

The lesson for crypto builders and users is simple: custodial and telco‑linked wallets live downstream of real‑name SIMs, centralized portals, and shifting AML designations. Outages, freezes, and enhanced checks are operating assumptions, not edge cases.

The black market: SIM farms, identity theft, and fraud at scale

Fraud is no longer a rounding error; it is an industry. Kenya’s Directorate of Criminal Investigations has seized thousands of SIM cards and ID documents from syndicates running M‑Pesa scams, SIM‑swap operations, and fake reversals—classic ingredients of a large‑scale social‑engineering market (DCI September 26, 2025 seizure; DCI May 21, 2025 arrests). TransUnion found that 82% of Kenyans surveyed were targeted by fraud between August and December 2024 (TransUnion Africa), and Kenya’s Financial Reporting Centre has highlighted rising suspicious transactions and systemic vulnerabilities across banks and money transfer operators (The EastAfrican summary).

Crucially, even beyond fraud, executive fiat has precedent in the region. Uganda blocked both social media and mobile money on election day in 2016, reminding operators and users that centralized rails can be switched off when politics demands it (Committee to Protect Journalists; USIP brief).

Why crypto now matters for East Africa’s payments

• Stablecoins are gaining real utility. Chainalysis reports Sub‑Saharan Africa received more than $205 billion on‑chain between July 2024 and June 2025—up 52% year over year—with a growing share tied to stablecoin settlement for trade and payments. Ethiopia, Kenya, and Ghana rank among the top five countries by received value in the region (Chainalysis 2025 SSA update). Multiple studies now estimate stablecoins comprise roughly 40–45% of crypto transaction volume in the region, reflecting demand for dollar‑denominated rails (TechCabal analysis).
• Remittances remain costly via legacy channels. The World Bank puts the average cost of sending $200 to Sub‑Saharan Africa near 7.9%, far above the 3% SDG target, with some intra‑Africa corridors exceeding 30%—a structural tailwind for lower‑cost, always‑on stablecoin routes (World Bank press release).
• Policy risk cuts both ways. A 2025 assessment by Standard Chartered warns that rapid stablecoin adoption could pull deposits from emerging‑market banks, spotlighting macro trade‑offs regulators must manage (Reuters coverage).

Taken together, demand‑side pressure (FX access, fees, uptime) and supply‑side clarity (licensing, analytics‑friendly ledgers) are lining up to make stablecoins a mainstream settlement layer—if on‑/off‑ramps stay open.

2025: The region’s policy pivot

Kenya took a decisive step in October 2025, when parliament passed a Virtual Asset Service Providers law that introduces licensing for exchanges and, crucially, central‑bank oversight for stablecoins. This could allow compliant fiat–stablecoin bridges integrated with the existing mobile money stack while hardening AML controls (Reuters report). At the same time, the Central Bank of Kenya has indicated that a retail CBDC is “not a compelling priority,” preferring to improve current rails over launching a digital shilling (coverage of CBK stance).

Ethiopia provides a contrast: mobile money is surging under a state‑centric model, while the central bank maintains that crypto transactions are illegal—underscoring how regulatory mosaic affects what builders can deploy and what users can safely do (Anadolu Agency on NBE ban; Reuters on Telebirr growth).

Finally, history matters: in 2015, Safaricom cut off a bitcoin startup’s access to M‑Pesa, and a Kenyan court upheld the suspension during litigation. That episode foreshadowed the strategic gatekeeping power telco wallets hold over fintech challengers—power that licensing and standardized APIs could now rebalance if implemented well (CoinDesk case recap).

Designing telco‑to‑crypto bridges that survive the vise

For regulators

• Codify stablecoin issuance and custody, plus bank‑grade reserve rules. Kenya’s new framework is a start; aligning with travel‑rule standards and clear permissions for API‑based settlement into mobile money would curb gray‑market flows while preserving user choice (Reuters on Kenya’s VASP bill).
• Treat uptime as critical infrastructure. Government payment portals need redundancy plans and incident reporting similar to systemically important payment systems (eCitizen outage case).

For fintechs and exchanges

• Build compliance first. On‑chain analytics, sanctions screening, and proof‑of‑reserves can make crypto rails more transparent than cash or agent‑based systems.
• Focus on real corridor value. Stablecoin payouts for SME trade and remittance corridors where the all‑in cost is double‑digit percentage points can win on price and speed ([World Bank rem