The Kenyan government is considering legalizing cryptocurrencies through a comprehensive regulatory framework.
In a recent report, Kenya reported that it is preparing legislation that will allow the use of cryptocurrencies in the region. This initiative, driven by Treasury Cabinet Secretary John Mbadi, seeks to regulate cryptocurrency trading and foster a safe and competitive environment that protects consumers and promotes innovation.
The proposed legislation reflects a significant shift from previous years, when cryptocurrencies were viewed with skepticism by the country's authorities due to concerns about volatility and financial security.
One step closer to legalization with a new regulatory framework
The moves towards cryptocurrency regulation in Kenya also appear to respond to criticism and recommendations made by the International Monetary Fund (IMF), which has urged Kenya to establish a legal framework to regulate these digital assets and avoid the associated risks.
According to the organisation, it is essential for Kenya to establish solid foundations to ensure a transparent and sustainable market that adequately responds to modern challenges.
Experts believe that by taking a proactive and regulated approach, the country has the opportunity to position itself as a leader in the digital finance ecosystem in Africa. This move could open the doors to new investments and economic opportunities and could facilitate financial inclusion for millions of Kenyans, thereby transforming the country’s financial landscape and preparing it for a more dynamic and digital future.
Kenya prepares new cryptocurrency policy
The crypto regulation that the government is preparing seeks to establish a "fair, competitive and stable market""where users can participate safely and where financial inclusion and economic development are promoted.
According to a report by Standard Media, one of the country's largest newspapers, the legislative proposal, which was presented in December, focuses on regulate trading in virtual assets and the activity of service providers of these cryptoassets.
The initiative will be open to public comment until January 24, thus allowing citizens to participate in the regulatory process.
This change of direction in cryptocurrency regulation represents a notable step forward in the country’s policies, considering that in 2015 the Central Bank of Kenya discouraged citizens from using cryptocurrencies due to the risks involved. However, despite these recommendations, the growing adoption of digital assets in the country has led Kenya to position itself as one of the most emerging crypto markets in the region, motivating the government to rethink its current stance.
Mbadi stressed that Kenya's financial sector is a “beacon of innovation and growth in Africa”He also stressed that the emergence of digital assets has created growth opportunities for users and for the local and international financial system. Therefore, with new legislation, Kenya aims to position itself as a leader in the global digital finance ecosystem, ensuring a safe environment for users and promoting market development.
The IMF's role in Kenyan crypto regulation
As mentioned above, the International Monetary Fund has emphasized the need to establish a clear legislative framework in Kenya, including specific definitions on cryptoassets.
In his recent report “Kenya: Technical Assistance Report-Crypto Regulation and Legislation”, the organization provided specific recommendations to establish a robust and transparent system to regulate digital assets in the country. This document, commissioned by the Kenya Capital Markets Authority, underlined the need for a clear legislative approach that defines and classifies cryptoassets, promotes inter-agency cooperation and ensures continuous market monitoring.
In addition, among its recommendations, the IMF stressed the importance of comply with international standards related to consumer protection and the prevention of money laundering. This is particularly relevant given that many countries are adopting similar approaches to regulating cryptocurrencies and ensuring their integration into the global financial system.
The IMF report also highlighted the importance of protecting consumers through a Greater financial education and regulatory clarity, essential aspects to mitigate risks such as volatility, and balance innovation with financial stability.
On the other hand, the IMF suggested the need for Implement a “regulatory sandbox”, which allows companies to enjoy a controlled space to test new technologies and business models. All these recommendations aim to enable Kenya to foster innovation without compromising the safety of users.
The potential benefits and challenges in the country
The legalisation of cryptocurrencies and digital assets in Kenya could bring with it a number of economic benefits. These include the possibility of attracting foreign investment and fostering innovation in the financial sector. Furthermore, the implementation of an appropriate regulatory framework could also facilitate faster and safer transactions, which would benefit both consumers and businesses.
However, this path is not without its challenges. Creating an effective regulatory framework for cryptocurrencies in the country will require time and effort from the government to educate both users and providers about the new regulations.
Still, Kenya is at an important crossroads in its relationship with cryptocurrencies. The decision to move towards a regulatory framework represents a significant shift in its economic and financial policy, one that could position the country as a leader in Africa’s digital finance ecosystem.
