Kenya moves to regulate cryptocurrency trading, following grey list concerns

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February 20, 2024
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2 min read
  • Kenya intends to enact new cryptocurrency trading laws due to concerns that they may raise the possibility of money laundering and provide channels for terrorism financing.
  • A sectoral working group is creating a policy document for the legal framework outlining what needs to be done and who will regulate digital asset providers. Following that, it will be submitted to the Cabinet for approval.
  • This move comes as the country seeks to improve its financial system before the Financial Action Task Force (FATF), the global watchdog on money laundering and terrorist financing, to avoid being grey-listed by the organisation.

The FATF "grey list" comprises nations under scrutiny for potential financial crimes and financing of terrorism, including South Sudan, Tanzania, Uganda, and Sudan. The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) counts FATF as an associate member.

Saitoti Maika, the Director General of the Financial Reporting Centre (FRC), the body responsible for combating money laundering and terrorism financing, stated that Kenya might eventually establish a separate regulator for virtual assets. 

“We can’t bury our heads in the sand. The more we fail to regulate, the more we risk being punished,” he added.

The FATF mandated that every country have financial intelligence, which led to the formation of Kenya's FRC.

“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 risk,” Maika said.

After ESAAMLG assessed Kenya's anti-money laundering, counter-terrorist and proliferation financing (AML/CFT) systems in 2022, the FATF identified areas of deficiency and gave the country 12 months to address them. October 2023 marked the end of this time frame. 

Consequently, the FATF will assess Kenya's progress during its meeting this week, and if it discovers any gaps, the country may be added to the grey list.

Cryptocurrency is fast becoming widespread, and adoption is gradually increasing. Nigeria continues to be the African nation with the highest volume of cryptocurrency transactions, despite Kenya's increase in cryptocurrency use, which now places it alongside South Africa and Ghana. 

However, Kenya has not yet established rules for dealing with the crypto market.

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In October 2023, Kenya's parliament tasked the Blockchain Association of Kenya (BAK) with developing the preliminary edition of what could become the Virtual Asset Service Providers (VASP) bill, also known as the Crypto Bill.

The BAK drafted the first-ever VASP bill in the country in February 2024 and released it for public comment. 


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