Kenya issues draft policy on virtual assets regulation

The Kenyan National Treasury and Economic Planning has developed a draft policy to guide the creation of regulations for virtual assets and virtual assets service providers (VASPs) in the country.

It has also called for public input and plans to conduct public participation forums as it looks to shore up its cryptocurrency regulatory drive. 

The details 

• The draft document, dated Dec. 2024, highlighted the country’s favored approach to relating with crypto assets before starting with a soft ban in 2015 and several subsequent public warnings against dealing with crypto. 
• However, there is still a glaring lack of a central and binding body of rules to guide crypto usage across board. 

Zoom in

• To create its crypto regulatory regime, Kenya is looking to draw inspiration from international bodies such as the Financial Action Task Force (FATF), the Financial Stability Board and the International Monetary Fund (IMF). 
• In addition, it is also looking at countries such as the United Kingdom, France, the United States of America, Singapore, Mauritius, Nigeria and the European Union to take lessons on implementing virtual assets regulations. 
• The draft recommended several policy interventions, chiefly the establishment of a comprehensive legal and regulatory framework governing the usage of virtual assets within Kenyan borders. 
• These regulations should comply with international standards and keep with anti-money laundering (AML) and combating the financing of terrorism (CFT) guidelines. 

Key quote 

• Kenya’s cabinet secretary in charge of the National Treasury and Economic Planning, Hon. FCPA John Ng’ongo, said; 

“The Government of Kenya is committed to creating the necessary legal and regulatory framework in order to leverage opportunities presented by VAs and VASPs while managing the resultant risks.” 

Zoom Out

• Crypto regulations in Kenya have been up and down, neither here nor there. 
• In 2015, the CBK warned financial institutions in the country to refrain from dealing with cryptocurrencies.  
• In 2023, the country introduced a controversial and widely debated digital asset tax (DAT) as part of its amended Finance Act. 
• This law stipulated a 3% tax on the gross income from the trade or exchange of virtual assets without minding whether they are exchanged at a profit or loss or merely moving assets between exchanges. 

Zoom out

• The East African country was also at the center of the controversy around the decentralized identity protocol, Worldcoin. 
• Regardless of these, Kenya remains the largest crypto market in East Africa and is in the top five crypto markets by volume in the continent.