IMF Recommends Regulatory Framework For Kenya's Crypto Market

According to Cointelegraph, the International Monetary Fund (IMF) has urged Kenya to establish a clear and predictable regulatory framework for its cryptocurrency market. This recommendation aims to protect consumers and address risks associated with Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT). The IMF's advice follows a request from Kenya's Capital Markets Authority (CMA) and was detailed in a technical assistance report released on January 8. The IMF highlighted that Kenya currently relies on outdated regulations designed for traditional markets, which are not legally binding for the crypto sector. This regulatory gap has led to an increase in crypto-related scams and criminal activities in the country. During consultations in Nairobi, IMF staff noted significant uncertainty and a lack of consensus among Kenyan lawmakers regarding the regulation of crypto assets. Consequently, the IMF recommended that Kenya develop a regulatory environment for cryptocurrencies that aligns with international frameworks and standards. The proposed framework should address the unique challenges and opportunities within Kenya's crypto market, ensuring it is robust, transparent, and capable of fostering innovation while safeguarding consumers and maintaining financial stability. The IMF's advice includes adherence to the Bali Fintech Agenda (IMF/World Bank), FATF Recommendations for AML and CFT, and the FSB Global Regulatory Framework for Crypto-Asset Activities. To address the gaps in Kenya's current regulatory framework, the IMF provided a series of recommendations. In the short term (six to twelve months), Kenya should conduct empirical analyses, establish collaboration and education among regulatory authorities, and clarify the scope of regulations. Medium and long-term recommendations (twelve to twenty-four months and beyond) include implementing a legal and licensing framework, strengthening supervisory resources, and aligning Kenya's regulatory framework with international standards. Additionally, the IMF advised Kenyan authorities to move beyond surveys and questionnaires to analyze the crypto market more effectively. It is crucial for Kenya to clearly define crypto assets under financial laws while avoiding conflicting terms such as 'digital currency' versus 'virtual asset' to ensure legal consistency. Lastly, the IMF recommended that Kenya engage with foreign regulators to manage risks posed by international exchanges operating within the country and foster cross-border cooperation for effective enforcement.