Kotani Pay, a Nairobi-based startup that provides crypto on-off ramps for the underbanked populations in Africa, has announced a USD 2.0 million pre-seed funding round led by P1 Ventures. The round also saw participation from DCG/Luno, Flori Ventures, Adaverse and Peer VC.
Remittances are a vital source of income for many Africans, especially those who have relatives working abroad. Data from the Central Bank of Kenya (CBK) indicates that diaspora remittances to Kenya have been on the rise with the total amount received standing at a cumulative USD 2,766.3 million in 2023 as of August 2023, 3.4% higher than the USD 2,674.5 mn recorded over the same period in 2022. However, sending money across borders is often costly and cumbersome, with fees that can reach up to 20% of the amount transferred.
The startup, founded in 2021, aims to make cross-border remittances easier and cheaper for African workers who send money home via crypto. It leverages stablecoins, which are cryptocurrencies pegged to fiat currencies like USD, to reduce the volatility and transaction costs of traditional money transfer methods.
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Kotani Pay has developed a middleware that connects blockchain protocols and decentralized applications (dapps) to local payment networks, such as mobile money platforms. This allows users to cash out their stablecoins in local currencies using a
simple feature phone interface without the internet.
The startup offers its technology as a B2B solution, partnering with several crypto platforms such as Yellowcard, DCG, Fonbank, Celo’s Valora, Mercy Corps, UNICEF Crypto Innovation Fund and Stellar. Kotani Pay also allows users to convert their local currencies into USD, a service that is currently available to businesses but could be extended to retail users in the future with the required licenses.
With the new funding, Kotani Pay plans to expand its services to more African markets, including Rwanda, Senegal, Ivory Coast, Tanzania and Nigeria. It also plans to introduce new products such as Reconset, a reconciliation-as-a-service offering, and
Money Ledger, a ledger-as-a-service solution. These products are the result of Kotani Pay’s acquisition of Fuhlstack, a Nigerian web3 startup whose founder Lemuel Okoli joins Kotani Pay as a co-founder.
Kotani Pay is optimistic about the regulatory environment in Africa, as more countries are launching licenses for digital asset fintechs and exploring central bank digital currencies. The startup believes that crypto can bring financial inclusion and empowerment to millions of Africans who lack access to formal banking services.
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