Kenya takes lead in developing Crypto Regulation

Kenya is on track to lead in shaping cryptocurrency regulations, with the Blockchain Association of Kenya (BAK) tasked by the National Assembly’s Departmental Committee on Finance and National Planning to create a “Virtual Asset Service Provider’s Bill.” This significant development comes after BAK’s recent legal challenge against Kenya’s digital asset tax.

In response to the invitation from the Committee on Finance and National Planning, BAK representatives discussed digital asset regulation. The meeting highlighted the need for Kenya to establish a clear licensing and regulatory framework for the crypto industry.

Allan Kakai, BAK’s legal and policy director, emphasised that Kenya’s position as a digital asset hub could be overtaken by other African countries like Nigeria, South Africa, Botswana, Namibia, and Mauritius if clear regulations are not put in place.

The committee has given BAK a two-month timeframe to draft the crypto bill. In addition, the committee emphasised the importance of robust public education on cryptocurrency trading to demystify the concept.

Kenya introduced the Financial Act 2023 in September 2023, which included a provision requiring cryptocurrency exchanges to withhold 3% of the transfer or exchange value of digital assets. BAK contested this tax in the High Court of Kenya.

The East-African country has taken a firm stance against the controversial Worldcoin digital ID crypto project, recommending its shutdown due to concerns about personal data harvesting.

Kenya’s crypto market is substantial, with transactions amounting to nearly $20 billion (KES 3 trillion) between July 2021 and June 2022. The country ranks third in Africa for crypto site traffic and 21st in global crypto adoption.

The collaboration between BAK and the National Assembly Committee aims to shape cryptocurrency and digital asset regulation policies, addressing key elements such as licensing, taxation, consumer protection, anti-money laundering, counter-terrorism financing measures, and a regulatory sandbox.

Kenya’s initiative aligns with efforts in other African countries like South Africa, Nigeria, and Mauritius, which have been actively developing regulatory frameworks for the crypto market. South Africa, Nigeria, and Mauritius lead the African crypto market with values of $25 billion, $19 billion, and $3 billion, respectively.