Kenya moves to regulate cryptocurrency trading amid FATF grey listing

The East African country, added to FATF’s grey list last week, committed to reining crypto-related money laundering and terrorism financing risks.

Kenya moves to regulate cryptocurrency trading amid FATF grey listing
Image source: Central Bank of Kenya | Graphics by Ifeoluwa Awowoye exclsuively for Mariblock

Kenya plans to introduce new laws for cryptocurrency trading, such as bitcoin. Their main goal is to rein in money laundering (ML) and terrorism financing (TF) risks. In addition, the country aims to remove itself from the Financial Action Task Force’s (FATF) grey list.

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Be smart: The FATF grey list includes countries or jurisdictions under increased monitoring. These countries have committed to addressing strategic deficiencies regarding money laundering, terrorist financing, and proliferation financing in an agreed period and are subject to increased monitoring.

Quick fact 

  • According to a Business Daily report, Kenya has set up a technical working group to guide the treasury on cryptocurrency. The group is currently preparing draft regulations to be sent to the cabinet for approval. 
  • The country currently lacks regulations for trading in cryptocurrencies. 

Key quote 

  • Director General Saitoti Maika of the Financial Reporting Center said: 
 “There is a working group focused on developing a policy document which will serve as a guide for creating a legal framework which will outline what needs to be done and who the regulator for this sector will be. There is a possibility of having a standalone regulator for virtual assets in Kenya.” 

He added: 

 “The concern has been that Kenyans are trading, and yet we don’t know, as a country, to what extent the proceeds that flow in this space are likely to get into the financial system. We are being reminded that as we become more sophisticated as a country, we have to deal with the risks.”

Why it matters 

  • Kenya is one of the leading African countries for cryptocurrency adoption and usage. However, the absence of precise regulation poses risks. 
  • A 2022 assessment of Kenya’s anti-money laundering and counterterrorist and proliferation financing regime by ESAAMLG stated that the lack of crypto regulatory oversight posed ML and TF risks. 
  • FATF identified some deficiencies and gave Kenya 12 months to address them, which elapsed in October 2023. 
  • Last week, the FATF added Kenya to its grey list, citing crypto-related money laundering concerns.

Zoom out 

 

  • In October 2023, Mariblock exclusively reported that Kenya’s parliament tasked the Blockchain Association of Kenya (BAK) with developing the first draft of what could become a virtual asset service provider’s bill. 
  • By January 2024, the body had drafted the country’s first-ever virtual assets service provider (VASP) bill to regulate the digital asset market in Kenya and released it for public feedback.