Kenya is taking significant steps toward regulating cryptocurrencies, signaling a departure from its historically cautious stance. Treasury Cabinet Secretary John Mbadi announced on January 10 that the government is committed to establishing a legal and regulatory framework for the sector.
The Kenyan government has introduced a draft proposal titled “National Policy on Virtual Assets and Virtual Asset Service Providers.” This document outlines the government’s vision for creating a “fair, competitive, and stable market” for cryptocurrencies while addressing risks such as money laundering, terrorism financing, and consumer protection.
According to the draft, the primary objective is to provide a comprehensive legal and regulatory framework for virtual asset activities and service providers (VASPs). The proposal also aims to establish standards and procedures for governing these activities. Public feedback on the draft is open until January 24, after which the government may finalize and implement the policy. If adopted, Kenya would join the ranks of South Africa and Nigeria, which have already implemented crypto-specific regulations.
A Shift in Kenya’s Stance on Cryptocurrencies
Cryptocurrencies are not banned in Kenya, but the Central Bank of Kenya (CBK) has previously issued warnings about their use. In December 2015, the CBK cautioned the public against transacting in Bitcoin and similar digital assets, citing concerns over fraud, lack of legal protections, and potential misuse for illicit activities. “Bitcoin and similar products are not legal tender nor are they regulated in Kenya. The public should therefore desist from transacting in Bitcoin and similar products,” the CBK’s notice stated.
However, the government’s position began to shift in September 2023, following a comprehensive risk assessment on money laundering and terrorism financing related to virtual assets and VASPs. The report concluded that regulation could mitigate risks and strengthen the country’s anti-money laundering (AML) framework.
Regional Trends in Stablecoin Adoption
Kenya’s move toward regulation coincides with significant growth in stablecoin transactions across Sub-Saharan Africa. Stablecoins have gained traction as a hedge against currency devaluation, accounting for nearly 43% of the region’s total crypto transaction volume.
Between July 2023 and July 2024, Kenya received $3.3 billion worth of stablecoins. While impressive, this pales in comparison to Nigeria’s $21.8 billion in stablecoin transactions, followed by South Africa at $13.5 billion and Ghana at $3.9 billion.
If Kenya’s draft policy is enacted, it could pave the way for broader mainstream adoption of cryptocurrencies in the country. By addressing key risks and establishing a robust regulatory framework, the government aims to create a safer and more competitive market for digital assets. This development also reflects a growing recognition of the economic potential of cryptocurrencies within the region.
