Kenya is reportedly making moves to regulate cryptocurrency trading, following the region’s grey list concerns. A sectoral working group is currently creating a policy document for the legal grounds highlighting the things that need to be done and also who will be regulating digital asset providers. And following up with that, it will also be submitted to the cabinet for approval.
Kenya Moves to Regulate Cryptocurrency Trading
This very move in question is coming at a time when the country and region seek to improve on its financial system just before the Financial Action Task Force (FATF), the worldwide watchdog on money laundering and terrorist financing, in a bid to avoid being grey-listed by the said organization.
The FATF “grey list” includes countries under scrutiny for potential financial crimes and terrorism financing, with South Sudan, Tanzania, Uganda, and Sudan among them. The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) considers FATF an associate member.
Saitoti Maika, Director General of the Financial Reporting Centre (FRC), responsible for combating money laundering and terrorism financing, suggested that Kenya might eventually establish a separate regulator for virtual assets. “We can’t ignore the issue. Failing to regulate could lead to consequences,” he emphasized.
FATF’s Requirement for Countries to Have Financial Intelligence
FATF’s requirement for countries to have financial intelligence led to the establishment of Kenya’s FRC. “The concern has been that Kenyans are trading, and yet we don’t know, as a country, to what extent the proceeds that flow in this space are likely to get into the financial system. We are being reminded that as we become more sophisticated as a country, we have to deal with the risk,” Maika stated.
Following ESAAMLG’s assessment of Kenya’s anti-money laundering, counter-terrorist financing, and proliferation financing (AML/CFT) systems in 2022, the FATF identified areas of deficiency and issued a 12-month period for the country to address them. This timeframe concluded in October 2023.
Usage and Adoption of Cryptocurrency
As a result, the FATF will review Kenya’s progress during its upcoming meeting this week. If any gaps are found, Kenya may be added to the grey list. Cryptocurrency usage is rapidly expanding, with adoption on the rise. Nigeria maintains its status as the African nation with the highest volume of cryptocurrency transactions. However, Kenya has seen an increase in cryptocurrency utilization, now placing it alongside South Africa and Ghana.
Kenya Is Yet To Establish Regulations for the Cryptocurrency Market
Nevertheless, Kenya has yet to establish regulations for the cryptocurrency market. In October 2023, Kenya’s parliament tasked the Blockchain Association of Kenya (BAK) with developing the initial version of the Virtual Asset Service Providers (VASP) bill, also known as the Crypto Bill. In February 2024, the BAK drafted the country’s first-ever VASP bill and released it for public feedback.
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