Kenya is in the process of developing fresh regulations to oversee the trading of cryptocurrencies like Bitcoin, local reports indicate.
The need for fresh regulations is driven by mounting concerns that the surge in virtual asset transactions within the country may elevate the potential for money laundering and the financing of terrorism.
A technical working group has been established to advise the country’s Treasury office on cryptocurrency matters. The group is currently crafting the initial regulations, which will subsequently be presented to the Cabinet for approval.
“Right now, there is a sectoral working group that is working on developing a policy document to guide on developing a legal framework which will prescribe what needs to be done and who will be the regulator for digital assets providers,” said the Financial Reporting Centre (FRC) Director-General, Saitoti Maika.
“Probably, we may end up with a stand-alone 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.”
Implementing measures like regulating cryptocurrencies will aid Kenya in enhancing the integrity of its financial system and mitigating the likelihood of being placed on the FATF (Financial Action Task Force) grey list – a category comprising nations subject to heightened scrutiny regarding risks such as money laundering and terrorism financing.
“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 risks,” said Mr Maika.
Kenya is a key regional business and travel hub as well as a gateway to the neighbouring East African economies and has well-developed trade links to the rest of the world. The East-African country has a well-established fintech space with mobile money, online betting, digital credit, online foreign exchange trading, and the use of cryptocurrencies, all rendering the current traditional financial sector regulations inadequate in safeguarding the integrity of financial transactions.
Kenya’s counterparts in the East African Community – Uganda, South Sudan, and Tanzania – are currently listed on the FATF’s ‘grey list,’ indicating they are subject to heightened monitoring concerning the risks associated with money laundering and terrorism financing.
In early 2023, the Financial Action Task Force (FATF) also added both South Africa and Nigeria to its ‘grey list.’
Nigeria 🇳🇬, South Africa 🇿🇦 Placed under FATF Grey List – A Total of 8 African Nations Now Under Scrutiny
Interestingly, Botswana was grey listed by FATF before its removal in early 2022 after passing a virtual assets bill to regulate trading of cryptohttps://t.co/wOOrKihLyM
— BitKE (@BitcoinKE) February 28, 2023
Interestingly, in October 2021, Botswana was grey listed by FATF before its removal in early 2022 after passing a virtual assets bill to regulate trading of cryptocurrencies. Soon after its removal, the South African country passed a virtual assets bill to regulate the trading of cryptocurrencies and digital tokens after it was put under a one-year observation period in October 2021.
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