Many people, especially the youth, have previously lost their hard-earned millions in scams due to a lack of crypto regulation in Kenya.
- Crypto adoption and usage in Kenya have grown significantly over the years.
- Kenyan authorities have always sought to introduce a regulatory framework for cryptocurrencies.
- The recent developments on the intended collaboration between the Senate committee and the CBK have offered renewed hope for proper crypto regulation in Kenya.
Widespread crypto adoption and usage
Crypto adoption and usage in Kenya have grown significantly over the years. According to a report released by UNCTAD in July 2022, the country had the highest proportion of crypto-owning inhabitants than any other African country in Africa. Further, Kenya’s crypto ownership as a share of the population stood at 8.5 per cent, the fifth-highest globally.
As per the report, Kenya led developed countries like the United States, which ranked sixth with 8.3 per cent of its population owning digital currencies. The United Kingdom at 5 per cent. In Africa, Nigeria and South Africa ranked behind Kenya at 6.3 and 7.1 per cent, respectively.
Crypto adoption and usage have remained on the rise as Kenyan investors explore new ways to preserve their wealth and carry out international transactions for individual remittances and commercial purposes, including importing goods.
Crypto experts have touted the payment of imports through digital currency as quick and convenient. People do not have to buy dollars using Kenya shilling or transfer money to cash transfer firms. Nevertheless, many people, especially the youth, have previously lost their hard-earned millions in scams due to a lack of crypto regulation in Kenya.
The quest for crypto regulation in Kenya
According to Dr Patrick Njoroge, Governor of the Central Bank of Kenya (CBK), Kenyan authorities have always sought to introduce a regulatory framework for cryptocurrencies. The CBK Governor has noted that the crypto sector needs proper regulation to avoid a wild west case scenario similar to mobile digital lenders.
“We need to appreciate that innovation is not innovation for innovation’s sake. Those promoting crypto may have wanted innovation for innovation’s sake. But our question is this a society that is the fastest that must also be well regulated, notwithstanding whatever happens. We have made the point that we do not want a Wild West scenario. And indeed, we did have a Wild West scenario with the digital credit providers.” Noted Dr Patrick Njoroge.
The Senate committee offers a significant boost
The CBK, under the leadership of Dr Njoroge in September 2022, began the process of issuing operating licenses to mobile lenders to carry out lending business in Kenya. The country’s move to properly regulate digital currencies, such as Bitcoin, has received a significant boost following the Senate’s resolve to develop frameworks for crypto operations.
The Senate Standing Committee on Information, Communication and Technology has resolved to initiate talks with the CBK to recognize crypto as a valid form of legal tender.
The standing committee, led by Trans Nzoia Senator Allan Chesang, has revealed its intention to collaborate with other stakeholders in formulating policies related to digital currencies, service providers, and crypto usage in Kenya.
While making a case for the move, the Senate’s committee said that the policy frameworks would help Kenyans transact with digital currencies with reduced risks.
The committee intends to facilitate secure and safe digital currency transactions for Kenyans by developing regulatory frameworks. As such, the committee has reiterated its advocacy for crypto regulations. It has also pledged to accelerate the implementation of a Central Bank Digital Currency (CBDC).
The CBK’s interesting position on crypto regulation in Kenya
In 2015, the CBK issued public warnings on the risks associated with crypto. Specifically, the CBK highlighted the volatile nature of cryptocurrency and the lack of definite regulation. Consequently, the CBK cautioned the public from trading crypto, including Bitcoin. However, the CBK did not explicitly prohibit crypto trading. Thus, Kenyans have been legally buying and selling crypto.
CBK further warned Kenyans that virtual currencies lacked protection to help them recover their money if providers closed shop. However, in February 2022, the CBK issued a discussion paper to examine the applicability of a potential CBDC in Kenya.
In September 2022, the CBK’s governor dismissed any possibility of ever considering Bitcoin as Kenya’s reserve currency. The governor insisted that digital currency offers no economic or payment solutions as their volatile nature makes them risky assets.
He made further attempts to dissuade lawmakers from keeping up with individuals who hype bitcoin and other cryptocurrencies. The governor claimed that he also received a similar kind of pressure. Kenya’s position has remained hard on crypto even without outright prohibition. However, the recent developments point towards an interesting change of stance.
The CBK is authorized to regulate cryptocurrencies through Kenya’s Money Remittance regulations. Under these regulations, cryptocurrency companies must acquire licensing from Kenyan authorities to offer transmission services within Kenya. Licensing is required whenever a company offers a service to transmit money or any representation of monetary value without creating payment accounts. The recent developments on the intended collaboration between the Senate committee and the CBK have offered renewed hope for proper crypto regulation in Kenya.