The government has moved to regulate the operations of cryptocurrencies in the country as it seeks to protect their users following the establishment of a multiagency technical working group.
The multi-agency technical committee, according to a brief to the National Assembly by National Treasury Cabinet Secretary Prof Njuguna Ndung’u while responding to nominated MP Irene Mayaka’s questions, includes the Central Bank of Kenya (CBK), the financial institution industry regulator.
The technical committee has the mandate to develop a regulatory and monitoring framework for the usage of cryptocurrencies also referred to as Virtual Assets (VAs) and those providing crypto assets and other virtual or digital assets services otherwise called Virtual Asset Service Providers (VASPs).
“The National Treasury has accordingly taken a policy decision to develop a regulatory and monitoring framework for Vas and VASPs through a multiagency technical working group to formulate the framework,” says Prof Ndung’u.
The cryptocurrency phenomenon is quite novel in Kenya and therefore the country does not have “any regulatory framework” to monitor its operations hence exposing consumers to fraud and scams related challenges.
“Due to the emergence of online marketing of virtual assets and online fraudulent investment options, CBK and other financial sector regulators issued notices warning the public against the use of unlicensed financial products and services,” says Prof Ndung’u.
The Financial Reporting Centre (FRC) of CBK, conducted a Money Laundering/ Terrorism Financing (ML/TF) risk assessment on VAs and VASPs in September 2023 and recommended their regulation to address Money Laundering and Combating the Financing of Terrorism risks among others including consumer protection, data privacy and governance.
Kenya’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Mutual Evaluation Report (MER) of 2022 by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) recommended that Kenya takes policy decision on Vas and VASPs.
The Directorate of Criminal Investigations (DCI) revealed that at least Sh2.5 billion was irregularly injected into the economy in 2023 through Mpesa withdrawals in payments to Kenyans who had their Irises scanned by the operatives of cryptocurrency Worldcoin before its activities in the country were hurriedly suspended by the government.
This came as it dawned on Kenyans that the reality of the cryptocurrency phenomenon was here to stay and that what needed to be done was regulation of the sector and recognition of the virtual assets as a legal tender.
Kenya is ranked second in Africa in cryptocurrency activities.
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Press Release from Carey Olsen, Thursday 26 September, 2024. Carey Olsen Bermuda Limited partner Steven Rees Davies has been recognised as one of Bermuda’s leading practitioners for Fintech