Kenya is set to regulate the crypto market in the region amid money laundering and scams. As the cryptocurrency market in Africa evolves, the Kenyan government has now formed a multi-agency technical working group to help regulate operations and in so doing, keeping things in check.
Kenya to Regulate the Crypto Market
Around a year ago, the Kenya Revenue Authority (KRA) shared its intention to collect 3% of the profits made by people trading digital money. Now, a team led by the Central Bank of Kenya is working on rules to keep an eye on cryptocurrencies, also known as virtual assets (VAs), and the services that handle them, called virtual asset service providers (VASPs).
According to Njuguna Ndung’u, the National Treasury Cabinet Secretary, “Due to the emergence of online marketing of virtual assets and online fraudulent investment options, CBK and other financial sector regulators issued notices warning the public against the use of unlicensed financial products and services.”
In September 2023, Kenya’s Financial Reporting Centre (FRC) conducted a risk assessment on virtual assets (VAs) and virtual asset service providers (VASPs), identifying concerns regarding money laundering and terrorism financing.
The assessment recommended regulatory measures to mitigate these risks, alongside addressing consumer protection, data privacy, and governance issues.
Kenya’s Growing Cryptocurrency Market
Kenya stands as East Africa’s largest cryptocurrency market, boasting significant trading volume and interest, placing it among the top cryptocurrency markets in Africa.
Community Reaction to Taxation
The announcement of a 3% tax on digital asset trading stirred strong reactions within Kenya’s cryptocurrency community. The Blockchain Association of Kenya (BAK) challenged the legality and constitutionality of this tax, filing a petition with the High Court of Kenya.
Drafting Regulatory Legislation
Responding to parliamentary requests, the Blockchain Association of Kenya (BAK) took the initiative to draft Kenya’s first Virtual Assets Service Provider (VASP) bill, aiming to regulate the digital asset market effectively.
Cautionary Measures Against Scams
In February 2024, the Directorate of Criminal Investigations (DCI) cautioned Kenyans about online cryptocurrency scams. These schemes have resulted in financial losses for victims, with fraudulent transactions allegedly violating anti-money laundering laws.
Worldcoin Scandal and Government Suspension
In 2023, the DCI uncovered irregular transactions amounting to at least KSh 2.5 billion, involving Worldcoin cryptocurrency and Mpesa withdrawals. The Kenyan government subsequently suspended Worldcoin’s operations in August 2023, a decision that remains despite pressure from the United States.
Conclusion
Kenya’s cryptocurrency landscape is undergoing significant regulatory developments amidst concerns over money laundering, terrorism financing, and consumer protection. The drafting of regulatory legislation and cautionary measures against scams reflect the government’s commitment to addressing challenges in the digital asset market.
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