In a groundbreaking development, Kenya is poised to become the first country in the world where industry representatives are actively involved in shaping the regulatory framework for cryptocurrencies.
The move comes as the Blockchain Association of Kenya (BAK) was directed by the National Assembly’s Departmental Committee on Finance and National Planning to draft what could potentially become a “virtual asset service provider’s bill.” This significant step underscores Kenya’s commitment to embracing the digital economy and maintaining its position as a prominent player in the African crypto landscape.
The call for clear crypto regulation
The Committee on Finance and National Planning convened a meeting with representatives from BAK to deliberate on the regulation of digital assets. Allan Kakai, BAK’s legal and policy director, articulated the urgency of the situation, emphasizing Kenya’s reputation as the “Silicon Savannah” and its prominent status in Africa’s digital asset market.
He stressed the need for a well-defined licensing and regulatory framework to prevent neighboring countries such as Nigeria, South Africa, Botswana, Namibia, and Mauritius from taking the lead and diverting potential capital flows away from Kenya.
In response to BAK’s call, the committee issued a two-month deadline for the drafting of a comprehensive crypto bill. Additionally, the committee urged BAK to conduct robust public education campaigns to demystify cryptocurrency trading, recognizing the importance of enhancing public understanding of this emerging financial ecosystem.
Kenya has not been without its share of challenges in the cryptocurrency space. In September 2023, the country introduced the Financial Act 2023, which mandated cryptocurrency exchanges to withhold 3% of the transfer or exchange value of digital assets. This move, while aimed at regulating the crypto industry and generating revenue, faced opposition from BAK.
Despite their efforts to dissuade lawmakers from passing the crypto tax, it was ultimately enacted into law. In response, BAK filed a complaint against the tax in the High Court of Kenya, reflecting their determination to ensure a favorable regulatory environment for the crypto sector.
Worldcoin project faces regulatory scrutiny
Kenyan authorities have also taken a firm stance against the controversial digital ID crypto project known as Worldcoin. Co-founded by Sam Altman, the CEO of OpenAI, the project raised concerns about the harvesting of personal data. In response to these concerns, a parliamentary committee within Kenya’s government recommended the shutdown of Worldcoin’s operations in the country. This move underscores Kenya’s commitment to safeguarding the privacy and security of its citizens in the evolving landscape of digital currencies.
As Kenya embarks on the path to developing its regulatory framework for cryptocurrencies, it sets a precedent for other nations to follow. By involving industry experts in the formulation of crypto-related legislation, Kenya aims to strike a balance between innovation and oversight, ensuring that the digital asset space operates within a clear and well-defined legal framework.
