Kenya has formed a multi-agency technical group to develop a regulatory and monitoring framework for the usage of cryptocurrencies, local reports indicate.
The multi-agency technical committee, according to a brief to the National Assembly by National Treasury Cabinet Secretary, Prof Njuguna Ndung’u, includes the Central Bank of Kenya (CBK), the financial institution industry regulator.
“The National Treasury has accordingly taken a policy decision to develop a regulatory and monitoring framework for Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) through a multi-agency technical working group to formulate the framework,” says Prof Ndung’u.
“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.
According to local reports, the Financial Reporting Centre (FRC) under the CBK performed a risk evaluation regarding Money Laundering/Terrorism Financing (ML/TF) concerning Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) in September 2023.
As a result, it suggested regulating them to mitigate Money Laundering and Terrorism Financing risks, alongside other concerns such as consumer protection, data privacy, and governance.
“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,” Financial Reporting Centre (FRC) Director-General, Saitoti Maika, said in February 2024, as reported by BitKE.
“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.”
🇰🇪 REGULATION | Kenya Seeks Crypto Regulation to Avoid FATF ‘Grey List’
Interestingly, BitKE has consistently highlighted previous greylistings as being related to a lack of crypto regulation in South Africa🇿🇦, Nigeria 🇳🇬, and Botswana 🇧🇼. Soon after passing virtual assets… pic.twitter.com/23h1lEHWgv
— BitKE (@BitcoinKE) February 20, 2024
Moreover, 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 government is also motivated by the recent debacle with WorldCoin which it suspended in August 2023 over data protection concerns.
🇰🇪REGULATION | The Kenya Ministry of Interior and National Administration Suspends WorldCoin Activities Pending Risk Assesment
“The government has suspended forthwith activities of WorldCoin and any other entity that may be similarly engaging the people of Kenya until relevant… pic.twitter.com/ecePvfRWXL
— BitKE (@BitcoinKE) August 3, 2023
According to the country’s Directorate of Criminal Investigations (DCI), approximately $16 million (KES 2.5 billion) entered the economy irregularly in 2023 via MPESA withdrawals, involving payments to individuals in Kenya who underwent iris scans conducted by operatives of the WorldCoin cryptocurrency.
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