The first-ever cryptocurrency bill in Kenya is being pushed to parliament by a local advocacy group

The Blockchain Association of Kenya (BAK), an advocate for digital asset policy, has put forward the country’s inaugural Virtual Assets Service Provider (VASP) bill to govern the Kenyan digital asset market. First introduced to the public on January 22, 2024, for consultation, the bill has received a spectrum of comments ranging from favorable to unfavorable from the Kenyan digital asset industry.

Kenya’s parliament asked a community-based NGO to draft an initial version of the cryptocurrency legislation at their primary meeting on October 31, 2023, with the expectation for it to be delivered by February 14. In August 2023, the BAK initially engaged with the National Assembly Committee on Finance and National Planning in Kenya, expressing concerns over the Digital Asset Tax (DAT) clause in the 2023 Finance Act.

Chainalysis’s cryptocurrency data analysis from July 2022 to June 2023 shows that Kenya boasts a sizeable cryptocurrency economy, with only Nigeria and South Africa ranking higher. Globally, Kenya ranked 21st in cryptocurrency adoption.

Despite this, Kenya’s cryptocurrency market faces challenges such as fraud, prohibitive entry barriers for cryptocurrency startups, and restrictive taxation policies. However, the proposed cryptocurrency legislation aims to address these issues by establishing a consumer protection framework.

Additionally, the bill proposes licensing requirements for operators under a regulatory sandbox, as well as anti-money laundering and counter-terrorism financing (AML/CTF) provisions to address the concerns of the industry and regulators.

The BAK has solicited feedback from stakeholders in Kenya, Africa, and beyond to provide feedback on the cryptocurrency draft legislation by February 7, 2024.

After this step, the lobby group will revise the initial draft based on the feedback they receive, in order to produce a second draft. This revised draft will then be forwarded to the Departmental Committee on Finance and National Planning of Kenya’s National Assembly on February 14, 2023.

Michael Kimani, the Founder and Chairman of BAK, shared his views on how the drafted bill would help position Kenya as a global digital asset hub, akin to places like Singapore and Dubai.

Digital asset regulation has long been a contentious issue across Africa. Nigeria and South Africa are among the countries that have begun to enact laws to regulate their markets, setting a precedence for other African countries.

If approved, BAK’s proposed bill is set to place Kenya in a position where it can fully leverage the potential tax revenue from the digital asset market.

Paul Gachora, the co-founder and CEO of BAK, stressed the significant economic benefits that digital assets and blockchain could offer the Kenyan government in its pursuit of economic recovery.

He stated, “Our objective is to assist Kenya in securing $1 billion in foreign direct investments for various sectors, as mapped out in Kenya’s medium-term economic plan by 2027.”