Kenya has enacted legislation to regulate cryptocurrencies.
Kenya is drafting legislation to regulate cryptocurrencies, marking a departure from earlier cautionary warnings by the Central Bank of Kenya (CBK).
On January 10, Treasury Cabinet Secretary John Mbadi said the government is “committed to creating the necessary legal and regulatory framework” for cryptocurrencies.
The announcement comes as Kenya prepares a new proposal titled “National Policy on Virtual Assets and Virtual Asset Service Providers”.
The draft proposal outlines plans to create a “fair, competitive and stable market” in Kenya to address concerns such as money laundering, terrorism financing and consumer protection issues.
“The main objective of this policy is to guide the development of a fair, competitive and stable Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) market in Kenya,” the draft proposal reads.
The draft also proposes to “provide a comprehensive legal and regulatory framework governing VA activities and virtual asset service provider VASPs” and to provide “standards and procedures for establishing and managing VA activities and VASPs.”
The draft proposal is open for public comment until January 24. If approved, Kenya could join countries such as South Africa and Nigeria.
Related: African economies show high potential for digital asset adoption
Kenya's crypto journey
While cryptocurrencies are not completely banned in Kenya, the CBK issued a warning against their use in December 2015. The statement cites concerns about fraud, lack of legal protections and the risk of them being used for illegal activities.
“Bitcoin and similar products are not legal tender or regulated in Kenya. The public should therefore refrain from trading in Bitcoin and similar products,” CBK warned.
A change came in September 2023 when Kenya completed a risk assessment of money laundering and terrorist financing on virtual assets and VASPs. The report recommends regulating virtual property activities to reduce risks and strengthen the AML framework.
Kenya's role in crypto adoption in sub-Saharan Africa
According to Chainalysis' 2024 report, Kenya is ranked 21st globally in Chinaalysis' Crypto Adoption Index.
Stablecoin transactions comprise about half of the total transaction volume in the region, largely due to the widespread currency collapse. Stablecoins account for 43% of the total transaction volume in sub-Saharan Africa.
Between July 2023 and July 2024, Kenya led the region with $3.3 billion worth of stablecoin transactions, while Nigeria led the region with $21.8 billion in stablecoin transactions, followed by South Africa with $13.5 billion and Ghana with $3.9 billion.
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