Kenya seeks public participation on crypto bill after IMF warns against risk

Kenya’s National Treasury has opened a public consultation on a new bill and policy aimed at regulating cryptocurrencies and virtual asset companies like crypto exchanges. This move comes as the International Monetary Fund (IMF) warned that Kenya is falling behind in regulating the industry.

The proposed bill could solve a legal grey area that has prevented banks from engaging with cryptocurrencies in the country. It also presents an opportunity for crypto exchanges like Binance, which operate without formal regulatory approval.

“The policy and the bill provide a framework for oversight and development of the virtual assets ecosystem,” the National Treasury said in a notice. The National Treasury is undertaking public participation on the policy and the bill and hereby invites members of the public to submit their views.”

Kenya’s financial sector is regulated by the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA). While the CMA has softened its stance on virtual assets, the CBK has maintained a firm position, repeatedly warning banks against engagement with virtual currencies.

The IMF has advised Kenya to implement a clear regulatory framework for virtual assets, citing concerns about risks related to money laundering and terrorism financing. The IMF’s report also highlights the absence of specific laws to govern cryptocurrencies and the failure of regulators to issue formal, binding policies on digital assets.

As a result, crypto exchanges have been unable to obtain operating licences, leaving users exposed to potential fraud and financial losses. This lack of regulation has also aided bad actors, with no clear oversight on how to manage or monitor the growing digital assets market. 

According to Chainalysis, 4 million Kenyans hold crypto assets. Without regulation, it is difficult to establish the true value of digital assets, which could run into millions of dollars.

“There is currently a significant degree of uncertainty and a lack of consensus among authorities regarding the actual size, structure, and risks of the Kenyan crypto assets market,” IMF said.

With public participation about to start, all eyes will be on how the government navigates the digital assets market.