Kenya’s New Crypto Rules: Legal Framework in Progress

• Kenya is preparing to legalize cryptocurrency trading through new regulations.
• The government aims to balance innovation with risks such as fraud and money laundering.
• Despite previous restrictions, 10% of Kenyans own cryptocurrencies, indicating a shift.

Kenya has signaled “yes” to the future of digital finance by legalizing cryptocurrency trading. Treasury Minister John Mbadi announced that the government is building a legal framework to regulate cryptocurrencies, including Bitcoin.

The move comes after years of restrictions banning digital currencies in East Africa. But despite the ban, people continued to use digital assets in the underground market, demonstrating the need for clear rules.

The new legislation, which is still being drafted, aims to create a fair and competitive market for virtual assets (VAs) and virtual asset service providers (VASPs). It will also focus on risks such as money laundering, terrorist financing and fraud.

John Mbadi noted that the government wants to achieve a balance between innovation and risk management. He noted that the regulations aim to leverage the benefits of digital assets while facing challenges.

It is worth noting that Kenya has pioneered financial innovation with Safaricom’s M-Pesa mobile money service, which revolutionized access to financial services in the country in 2007.

Crypto risks and rewards

While the benefits of digital assets are clear, Mbadi also pointed out the risks, including money laundering, tax evasion, fraud, cybercrime and weak consumer protection.

He cited the National Risk Assessment Report on Virtual Assets and Virtual Asset Service Providers, which was completed in September 2023, to highlight these issues.

To address these challenges, the government wants to build a stable market that encourages innovation while protecting against financial crimes.

Kenya’s experience with cryptocurrencies

Kenya’s relationship with digital assets has been complex. In 2015, the central bank warned against their use and banned virtual currencies as legal tender. But a United Nations report released in 2022 showed that nearly 10% of Kenyans own cryptocurrencies.

Read also: Kenya collects $77.5 million in crypto taxes – next target is $465 million, with focus on exchanges

The country plans to release its draft national policy on virtual assets and virtual asset service providers, which will guide the establishment of a legal and regulatory system for the cryptocurrency industry.