Kenya is creating laws to control cryptocurrency

A draft plan for cryptocurrency regulation is being prepared by Kenya and is available for public comment until January 24.

In contrast to the cautionary cautions previously made by the Central Bank of Kenya (CBK), Kenya is drafting laws to regulate cryptocurrency.

The government is “committed to creating the necessary legal and regulatory framework” for cryptocurrencies, according to a report issued by Treasury Cabinet Secretary John Mbadi on January 10.

Kenya is drafting a new proposal called “National Policy on Virtual Assets and Virtual Asset Service Providers,” which coincides with the announcement.

While addressing threats including money laundering, terrorism financing, and consumer protection concerns, the draft proposal describes aims to establish a “fair, competitive, and stable market” for cryptocurrencies in Kenya.

The original proposal said that the primary goal of the policy was to direct the creation of a stable, competitive, and equitable market for virtual assets (VAs) and virtual asset service providers (VASPs) in Kenya.

Additionally, the draft suggests “forming standards and procedures to establish and govern VA activities and virtual asset service providers VASPs” as well as “providing a comprehensive legal and regulatory framework governing VA activities and VASPs.”

Public comments on the draft plan are welcome until January 24. Kenya would join nations like South Africa and Nigeria that have previously enacted crypto laws if it is accepted.

Kenya's journey with cryptocurrency

Kenya does not have a complete prohibition on cryptocurrencies, but in December 2015, the CBK warned the public not to use them. Concerns over fraud, a lack of legal protections, and their possible use in illegal operations were mentioned in the statement.

In Kenya, bitcoin and related items are not regulated nor accepted as legal money. As a result, the public should refrain from using Bitcoin and comparable items, the CBK cautioned.

Kenya’s completion of a risk assessment on virtual assets and VASPs for money laundering and terrorism funding in September 2023 marked a watershed. In order to reduce risks and fortify the AML framework, the research suggested regulating actions involving virtual assets.

Kenya's Contribution to the Crypto Adoption in Sub-Saharan Africa

Kenya is ranked 21st in the world on the Chainalysis Crypto Adoption Index, per the Chainalysis 2024 study.

Due in large part to rampant currency devaluation, stablecoin transactions account for almost half of the region’s entire transaction volume. About 43% of all transactions in Sub-Saharan Africa are made using stablecoins.

Kenya received $3.3 billion in stablecoins between July 2023 and July 2024, while Nigeria tops the area in stablecoin transactions with $21.8 billion, followed by South Africa with $13.5 billion and Ghana with $3.9 billion.

FAQ

What is Kenya's draft plan for cryptocurrency regulation?

Kenya is preparing a draft policy titled “National Policy on Virtual Assets and Virtual Asset Service Providers.” This proposal aims to create a comprehensive legal and regulatory framework for virtual assets (VAs) and virtual asset service providers (VASPs) while addressing concerns such as money laundering, terrorism financing, and consumer protection.

Why is Kenya introducing cryptocurrency regulations now?

While Kenya’s Central Bank has previously warned against cryptocurrency use, the government now recognizes the potential benefits and risks of virtual assets. The draft policy reflects a commitment to fostering a stable, competitive, and fair market while mitigating associated threats.

What is the timeline for public input on the draft policy?

The draft policy is open for public comments until January 24. Citizens and stakeholders are encouraged to provide feedback to shape the final regulatory framework.

How does Kenya rank in cryptocurrency adoption globally and regionally?

According to the 2024 Chainalysis Crypto Adoption Index, Kenya ranks 21st globally. In Sub-Saharan Africa, Kenya is a significant player, receiving $3.3 billion in stablecoin transactions between July 2023 and July 2024, contributing to the region’s growing crypto market.

What challenges is Kenya addressing with cryptocurrency regulations?

Kenya’s proposed regulations aim to tackle risks such as fraud, lack of consumer protection, money laundering, and terrorism financing. By introducing clear standards and procedures for VAs and VASPs, the government seeks to create a secure and transparent crypto ecosystem.