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Kenya’s cryptocurrency market is one of the largest in Africa, with Kenyans increasingly using digital currencies for remittances, investments, and transactions.
Yet despite a high rate of crypto adoption and a digital-first population eager to capitalise on this transformative technology, the Kenyan government’s attitude remains vague.
While having sent out a cautionary notice in 2015 warning banks and other financial institutions against dealing with crypto, the Central Bank of Kenya (CBK) has yet to implement any official regulatory rules.
Financial institutions, on the other hand, still flinch at the decade-old cautionary notice, further impeding the sector’s expansion. Due to this cautionary notice, crypto companies are unable to hold a bank account with any local bank to date.
On the bright side, it does not mean that crypto is illegal, it just means that Kenyan banks cannot touch crypto companies. This puts very innovative banks in a weird situation given that some of their global counterparts and partners e.g Visa are already exploring crypto integrations across the world.
Globally, authorities are moving fast to address the challenges and exploit opportunities presented by digital currencies.
In the wake of clouding legal uncertainties in the US, for instance, the Securities and Exchange Commission (SEC) has taken a leading position in monitoring crypto firms.
At the same time, Europe has approved the Markets in Crypto-Assets (MiCA) law, which establishes a comprehensive framework designed to regulate digital assets throughout the European Union. MiCA creates explicit criteria on everything from stablecoins to anti-money laundering (AML) procedures, intending to promote transparency and consumer safety while allowing for innovation to grow.
Closer home, Nigeria, from a ban to a boom, has implemented legislation guiding cryptocurrency enterprises and their interaction with the SEC. South Africa, another major actor in the African crypto sector, has long been incorporating cryptocurrencies into its financial regulatory framework.
Kenya’s slow pace to regulate may prove costly in the long term.
As Kenya touts itself as Africa’s technology leader, the dearth of progressive crypto regulations is not only contradictory but also threatens the country’s fintech-driven growth. The fintech sector has been a key driver of Kenya’s economy, employing thousands and drawing major international investment.
However, whereas mobile money networks are well-regulated, the inverse holds for cryptocurrencies.
Without legislative certainty, crypto businesses operating in Kenya may seek more accommodating havens, taking their innovations and potential revenue returns with them. Furthermore, the regulatory gap leaves consumers and businesses at risk of exploitation and gives leeway for the thriving of other financial crimes such as money laundering.
Kenya could look to Nigeria and South Africa for regulatory balancing. Nigeria’s policy of mandating registration and compliance with national security legislation, for instance, has allowed the crypto industry to operate under the eye of the government, creating a more secure environment for investors.
South Africa’s policies prioritise consumer protection, tackling crypto frauds that have plagued the sector and soiled its name.
Kenya has done well in installing a sandbox model through the Capital Markets Authority (CMA), where builders have been able to test crypto-based products under the CMA’s supervision in the controlled environment, allowing them to better understand the market and tweak rules as needed. However, more can still be done.
Kenya stands at a crossroads, with digital finance demanding a thoughtful and forward-looking response. Ignoring this reality would mean missing out on a powerful tool for financial inclusion, innovation, and economic growth.
As crypto technology reshapes markets and redefines access to wealth, Kenya has a unique chance to be proactive, not reactive. The world is watching, and so are the millions of Kenyans ready to take part in a decentralised digital economy that offers options beyond the traditional banking system.
The writer is Virtual Assets Chamber of Commerce director
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