Kenya Moves Toward Cryptocurrency Regulation With New Proposal

According to Cointelegraph, Kenya is advancing towards regulating cryptocurrencies, marking a significant shift from the Central Bank of Kenya's (CBK) previous cautious stance. On January 10, Treasury Cabinet Secretary John Mbadi announced the government's commitment to establishing a legal and regulatory framework for cryptocurrencies. This development coincides with the drafting of a new proposal titled 'National Policy on Virtual Assets and Virtual Asset Service Providers.' The draft proposal aims to create a fair, competitive, and stable market for cryptocurrencies in Kenya while addressing potential risks such as money laundering, terrorism financing, and consumer protection issues. It outlines the primary objective of guiding the development of a market for virtual assets (VAs) and virtual asset service providers (VASPs) in the country. The proposal seeks to provide a comprehensive legal and regulatory framework governing VA activities and VASPs, alongside formulating standards and procedures for their establishment and governance. Public feedback on the draft proposal is open until January 24. If approved, Kenya could join other African nations like South Africa and Nigeria, which have already implemented cryptocurrency regulations. While cryptocurrencies are not banned in Kenya, the CBK issued a public notice in December 2015 warning against their use, citing concerns about fraud, lack of legal protections, and potential involvement in illicit activities. The CBK emphasized that Bitcoin and similar products are not legal tender nor regulated in Kenya, advising the public to refrain from transacting in them. A pivotal moment occurred in September 2023 when Kenya completed a risk assessment on money laundering and terrorism financing related to virtual assets and VASPs. The report recommended regulating virtual asset activities to mitigate risks and enhance the anti-money laundering framework. In the broader context of sub-Saharan Africa's crypto adoption, Kenya ranks 21st globally on the Chainalysis Crypto Adoption Index, as per the 2024 report. Stablecoin transactions account for nearly half of the total transaction volume in the region, driven by widespread currency devaluation. Between July 2023 and July 2024, Kenya received $3.3 billion worth of stablecoins, while Nigeria led the region with $21.8 billion in stablecoin transaction volume, followed by South Africa at $13.5 billion and Ghana at $3.9 billion.