Kenya’s $20 billion crypto market takes first step to regulation

The crypto market in Kenya is huge and is already being taxed under the provisions of the Finance Act, 2023. 

Kenya’s parliament has asked the Blockchain Association of Kenya (BAK) to prepare the first draft of what might become the Virtual Asset Service Provider’s Bill, commonly known as the Crypto Bill. The decision followed BAK’s second appearance before the National Assembly Committee on Finance and National Planning on October 31. BAK’s first engagement with the committee was in August 2023 when it opposed the Digital Asset Tax (DAT) provision in Kenya’s Finance Act, 2023. BAK’s draft preparation coincides with notable cryptocurrency transactions in Kenya, reaching nearly $20 billion (KES 3 trillion) between July 2021 and June 2022. Kenya’s engagement with crypto assets is also high, coming in third position in Africa for crypto site traffic and 21st in global crypto adoption.

The meeting between BAK and the National Assembly Committee sought to enable BAK to partner with the national government in shaping cryptocurrency and digital asset regulation policies. BAK, alongside Binance, Yellow Card, Kotani Pay, and the Law Society of Kenya (LSK), presented key elements for a robust regulatory framework, including a clear licencing framework, tax framework, consumer protection framework, anti-money laundering (AML) and counter-terrorism financing measures, and a regulatory sandbox.

In response, the parliamentary committee directed BAK to draft and submit a bill governing digital assets within two months. This development acknowledges a knowledge gap that has historically hindered their ability to address this asset class. It also marks a unique instance of a parliamentary committee instructing an association to draft a bill for adoption.

BAK’s directive to draft Kenya’s digital asset regulatory framework, including tax integration and revenue guidelines, mirrors efforts in South Africa (Financial Sector Conduct Authority), Nigeria (Finance Act 2023, SEC Regulations on Digital Assets), and Mauritius (Virtual Asset and Initial Token Offering Services Act 2021), which lead in Africa’s crypto market values at $25 billion, $19 billion, and $3 billion, respectively.