With Kenya ranking 28th globally in crypto adoption, authorities see the need for clear regulations to manage the booming industry.
The Kenyan government has introduced a draft policy requiring cryptocurrency businesses to establish local offices within the country, Bloomberg reported on Tuesday citing the country’s National Treasury’s website.
According to the report, the proposed legislation does not apply to companies offering access to assets that are confined to a closed ecosystem, meaning they cannot be transferred, exchanged, traded externally, or used for payments or investments.
Scope of the Proposed Law
Other media outlets also reported that the law mandates that virtual asset service providers (VASPs), including prominent exchanges like Binance and Coinbase, open a physical office and appoint chief executive officers or directors to operate in the region.
However, the appointment will be subject to approval from regulatory bodies such as the Capital Markets Authority (CMA).
The move is part of the country’s effort to introduce a comprehensive regulatory framework for consumer protection.
Earlier this month, financial authorities in Kenya launched a public consultation ending January 24 on proposed crypto regulations. The proposed policy aims to establish a comprehensive legal framework for licensing and regulating VASPs, including exchanges and wallet providers.
The draft policy outlined several key provisions to ensure a fair and secure virtual asset market. Under the proposed law, VASPs must obtain licenses from designated regulators, including the Central Bank of Kenya (CBK) and the CMA in order to operate within the region.
Additionally, licensed entities are required to comply with stringent AML and CFT measures to prevent the misuse of cryptocurrencies for illegal activities. The policy seeks to address issues related to data privacy and cybersecurity, ensuring that VASPs implement adequate measures to protect users’ information.
Crypto Adoption in Kenya
While the country is yet to introduce crypto regulations, the African nation has already implemented a 1.5% Digital Assets Tax (DAT) for crypto traders. The move was part of the Finance Act 2023.
Due to the absence of specific regulations, the government has relied on the voluntary payment of this tax.
Meanwhile, Kenya has witnessed a significant rise in digital asset adoption, ranking 28th out of 155 countries in the Global Cryptocurrency Adoption Index by Chainalysis. This surge is attributed to the increasing use of digital assets for remittances and as alternatives to traditional financial services.
Historically, the Kenyan government has maintained a cautious stance toward cryptocurrencies. In 2015, the CBK issued a public notice warning against the use of virtual currencies like Bitcoin (BTC), stating that they are not legal tender and lack consumer protection.
Despite these warnings, crypto usage continued to flourish underground. Recognizing the growing influence of digital assets, the government is now shifting its approach.
Kenya’s Crypto Presence Compared to Other African Countries
In the African context, Kenya’s proactive steps toward regulating cryptocurrencies position it as a leader in the region. While countries like Nigeria have implemented crypto regulations, Kenya’s comprehensive approach aims to balance innovation with consumer protection.
Notably, the Central African Republic (CAR) adopted Bitcoin as legal tender in 2022, becoming the second country globally, after El Salvador, to do so.
However, Kenya’s strategy differs by focusing on creating a regulated environment for virtual assets rather than adopting them as legal tender.
next