Kenya’s National Treasury has initiated a public consultation process for a new bill and policy aimed at regulating cryptocurrencies and virtual asset companies, including crypto exchanges. This initiative follows a warning from the International Monetary Fund (IMF) that Kenya is lagging in establishing regulatory measures for the burgeoning cryptocurrency industry.
The proposed bill seeks to address a legal grey area that has so far prevented banks in Kenya from engaging with cryptocurrencies. It also presents a formal regulatory opportunity for crypto exchanges like Binance, which currently operate without official approval.
In an official notice, the National Treasury stated;
The policy and the bill provide a framework for oversight and development of the virtual assets ecosystem. The National Treasury is undertaking public participation on the policy and the bill and hereby invites members of the public to submit their views.
Kenya’s financial sector is primarily regulated by the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA). While the CMA has shown a more lenient stance towards virtual assets, the CBK has consistently maintained a strict position, repeatedly cautioning banks against engaging with virtual currencies.
The IMF has urged Kenya to implement a clear regulatory framework for virtual assets, highlighting concerns related to money laundering and terrorism financing. The IMF’s report points out the absence of specific laws governing cryptocurrencies and the failure of regulators to issue formal, binding policies on digital assets.
Due to the lack of regulation, crypto exchanges have been unable to obtain operating licenses, leaving users vulnerable to potential fraud and financial losses. This regulatory void has also facilitated the activities of bad actors, with no clear oversight on managing or monitoring the growing digital assets market.
According to Chainalysis, approximately 4 million Kenyans hold crypto assets. Without regulation, it is challenging to determine the true value of these digital assets, which could amount to millions of dollars. “There is currently a significant degree of uncertainty and a lack of consensus among authorities regarding the actual size, structure, and risks of the Kenyan crypto assets market,” the IMF noted.
As the public consultation process begins, all eyes will be on how the Kenyan government navigates the complexities of the digital assets market. The outcome of this process will be crucial in shaping the future of cryptocurrency regulation in Kenya, ensuring both the protection of users and the integrity of the financial system.
