Kenya is preparing legislation to regulate cryptocurrencies, marking a shift from the cautious warnings previously issued by the Central Bank of Kenya (CBK).
On Jan. 10, Treasury Cabinet Secretary John Mbadi reportedly said the government is “committed to creating the necessary legal and regulatory framework” for cryptocurrencies.
The announcement comes as Kenya drafts a new proposal titled “National Policy on Virtual Assets and Virtual Asset Service Providers.”
The draft proposal outlines plans to create a “fair, competitive, and stable market” for cryptocurrencies in Kenya while addressing risks like money laundering, terrorism financing and consumer protection issues.
“The main objective of this policy is to guide the development of a fair, competitive, and stable market for virtual assets (VAs) and virtual asset service providers (VASPs) in Kenya,” the draft proposal read.
The draft further proposes to “provide a comprehensive legal and regulatory framework governing VA activities and virtual asset service providers VASPs” and “formulate standards and procedures to establish and govern VA activities and VASPs.”
The draft proposal is open for public feedback until Jan. 24. If approved, Kenya could join countries like South Africa and Nigeria, which have already implemented crypto regulations.
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Kenya’s crypto journey
While cryptocurrencies are not outright banned in Kenya, the CBK issued a public notice in December 2015 cautioning against their use. The statement noted concerns about fraud, lack of legal protections, and their potential use in illicit activities.
“Bitcoin and similar products are not legal tender nor are they regulated in Kenya. The public should therefore desist from transacting in Bitcoin and similar products,” the CBK warned.
A turning point came in September 2023, when Kenya completed a money laundering and terrorism financing risk assessment on virtual assets and VASPs. The report recommended regulating virtual asset activities to mitigate risks and strengthen the AML framework.
Kenya’s Role in sub-Saharan Africa’s crypto adoption
According to Chainalysis’ 2024 report, Kenya ranks 21st globally on the Chainalysis Crypto Adoption Index.
Stablecoin transactions comprise nearly half of the total transaction volume in the region, largely due to widespread currency devaluation. Stablecoins account for approximately 43% of Sub-Saharan Africa’s total transaction volume.
Between July 2023 and July 2024, Kenya received $3.3 billion worth of stablecoins, while Nigeria leads the region with $21.8 billion in stablecoin transaction volume, followed by South Africa at $13.5 billion and Ghana at $3.9 billion.
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