Kenya has released a Draft National Policy on Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs to address tax evasion, fraud and cybercrime risks associated with cryptocurrencies. This is a big shift from restricting crypto to promoting its safe use in the economy.
Key Points in the Draft Policy
The policy by the National Treasury aims to create a solid legal framework for VAs and VASPs. It balances financial innovation and compliance, a competitive market and risks of money laundering, terrorism financing and consumer protection.
John Mbadi, Treasury CS, said, “This policy provides a basis for a stable market that promotes financial literacy and sound risk management.” He added that this policy will position Kenya as a major player in the global digital finance space.
Why Now?
Treasury cited several reasons why Kenya is keen on regulating cryptocurrencies:
- Growing demand for alternative investments.
- Virtual assets facilitate cross border transactions.
- The anonymity of digital currencies is a concern for misuse for illegal purposes.
The International Monetary Fund (IMF) has also committed to support Kenya’s efforts, technical assistance to help the country develop a full regulatory framework. The regulatory framework is expected to be ready by April 2025 and will be aligned to Financial Action Task Force (FATF) recommendations.
Kenya’s Crypto Adoption
Kenya has seen significant crypto adoption. According to the 2023 Geography of Cryptocurrency Report by Chainalysis, Kenya is:
- 21st in the world on the crypto adoption index.
- 3rd in the world for peer-to-peer (P2P) exchange trade volume.
More data shows that Kenya accounted for over 12% of Africa’s P2P bitcoin trade in 2020, second only to Nigeria. A 2017 report by Citi found that bitcoin in Kenya was 2.3% of GDP in 2016, this is a big deal for the economy.
What’s Next?
Public comments on the draft policy are ongoing, the comments will shape the final policy. Once in place this will boost investor confidence, curb illicit financial activities and promote innovation in Kenya’s growing crypto space.