Key Takeaways

• Kenya is set to legalize cryptocurrencies, as announced by Treasury Cabinet Secretary John Mbadi.
• This planned legislation is aimed at creating a regulated environment for cryptocurrencies and Virtual Asset Service Providers, while mitigating risks including money laundering and fraud.

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Kenya plans to legalize crypto assets, shifting away from its previous ban as the country recognizes their widespread use and potential benefits, said Kenya’s Treasury Cabinet Secretary John Mbadi in a Jan. 10 statement, first reported by The Standard.

“Kenya’s financial sector is a beacon of innovation and growth in Africa,” Mbadi stated. “The emergence and growth of Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) have given rise to innovations in the local and international financial system with dynamic opportunities and challenges.”

The draft policy is aimed at establishing a “fair, competitive, and stable market for VAs and VASPs” while addressing risks including money laundering, terrorism financing, and fraud through a comprehensive regulatory framework, the report noted.The proposed legal framework seeks to harness the benefits of digital financial innovation, fostering a competitive market for crypto assets and enhancing financial inclusion.Mbadi stated that Kenya “has consistently pushed the boundaries of financial inclusion through technological advancements.” This has been proven through the country’s track record of financial innovation, especially the launch of Safaricom’s M-Pesa mobile money service in 2007, he said.

“This dynamic sector has fostered economic growth and empowered individuals” he noted, adding that interest in virtual assets has grown, with users attracted to their speed, cost-effectiveness, and cross-border capabilities.

Legalizing crypto assets is also part of the strategy to position Kenya as a major player in the global digital finance ecosystem, according to Mbadi.Kenya currently lacks clear regulations for crypto trading and usage despite ranking third in Sub-Saharan Africa and 28th globally in crypto adoption, according to Chainalysis’ 2024 report. The Central Bank of Kenya previously warned against crypto risks, citing concerns about lack of legal tender status, anonymity, volatility, and potential criminal activity.The latest development follows a technical assistance report recommending improved crypto regulations for Kenya, issued by the International Monetary Fund (IMF) on Wednesday.The IMF advised the government to focus on compliance with international standards, addressing issues such as consumer protection and risks associated with anti-money laundering and combating the financing of terrorism.

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