Key Highlights
- Kotani Pay raised a $2 million pre-seed round led by P1 Ventures to expand its crypto-powered remittance platform across Africa.
- The startup enables cross-border transfers via stablecoins pegged to the US dollar, allowing for lower fees and faster settlement compared to traditional remittances.
- Kotani Pay has processed over $23 million in transaction volume so far. The company links crypto networks with local mobile money APIs to facilitate cashing out.
- The funding will support launching in new African markets like Nigeria, Rwanda, Senegal, and Ivory Coast. Kotani Pay aims to leverage crypto to increase financial inclusion.
Kotani Pay, a Nairobi-based cryptocurrency payments platform, has closed a $2 million pre-seed funding round to bring crypto-powered remittances to new African markets.
The round was led by San Francisco’s P1 Ventures, with participation from major crypto investors like Digital Currency Group (DCG)/Luno and Flori Ventures.
Kotani Pay leverages blockchain technology to facilitate cross-border money transfers via stablecoins pegged to the US dollar. This allows for dramatically lower fees and faster settlement times compared to traditional remittance methods.
Kotani Pay: Expanding Access to Crypto-Powered Remittances
With the new funding, Kotani Pay plans to expand operations beyond Kenya to Nigeria, Rwanda, Senegal, and Ivory Coast in 2023.
The startup aims to increase financial inclusion in Africa by enabling diaspora communities abroad to seamlessly send money home using cryptocurrency. Remittances from abroad represent a major source of income for many families across the continent.
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Kotani Pay’s platform links the smart contracts of partner crypto networks like Stellar with local mobile money APIs. This integration allows users to cash out stablecoin remittances directly to mobile wallets.
Businesses can also use Kotani Pay to convert local African currencies into USD through the crypto rails. The company plans to extend this service to individuals in the near future.
Upcoming product launches include Reconset for bank settlements and Money Ledger for accounting. Kotani Pay also enables crypto-to-cash transfers on basic feature phones via SMS.
What Are Stablecoins?
Stablecoins are a type of cryptocurrency that are designed to have a stable value. Unlike volatile cryptocurrencies like Bitcoin or Ethereum that can fluctuate wildly in price, stablecoins are pegged to a reserve asset to maintain a consistent value.
The most common type of stablecoin is one that is pegged to a fiat currency like the US dollar. For example, a stablecoin could be programmed to always be worth $1 USD. These stablecoins are backed by dollar reserves held in a bank so that each coin issued can be redeemed for $1. This allows the stablecoin to maintain its peg and stabilize its price.
Other stablecoins are pegged to other assets like gold or other cryptocurrencies. The companies issuing stablecoins will adjust the supply to maintain the peg. When demand rises, more coins are issued. When demand falls, coins are taken out of circulation.
A key benefit of stablecoins is that they provide price stability. This makes them useful for savings, commercial transactions, and transferring funds between exchanges. While volatility provides opportunities for speculation, stablecoins offer a way to avoid price swings and provide reliable value in the crypto space.
$23M Volume Demonstrates Growing Traction
To date, Kotani Pay claims to have processed over $23 million in transaction volume, with average transfer amounts of $15,000. This demonstrates strong early traction for bridging the gap between cryptoassets and local African currencies.
The company operates in full compliance with regulations in target countries. Kotani Pay either partners directly with licensed mobile money operators or works through regulated third parties.
This approach has helped assuage concerns among central banks and regulators observing the nascent crypto industry. Many are even beginning to warm up to stablecoin use cases for payments.
CEO Felix Macharia believes enabling robust oversight is critical for sustainable growth in Africa. He pointed to clear crypto licensing frameworks adopted in jurisdictions like South Africa and the EU as positive developments.
Alleviating the Burden of Traditional Remittances
High fees have historically plagued international money transfers to and within Africa. Kotani Pay fills a huge need by allowing diaspora communities to send funds home more affordably using cryptocurrency rails.
The World Bank estimates that remittance fees averaged 6.3% globally in early 2022. Meanwhile, transfers via stablecoins typically incur only minuscule blockchain network costs.
Accelerating financial inclusion in Africa remains an urgent priority. Though fintech adoption is rising, millions still lack basic access to financial services.
With its latest funding round, Kotani Pay is poised to ramp up its mission of leveraging crypto to provide an efficient, low-cost remittance pipeline for the continent.
