Kenya is making bold moves in the world of cryptocurrency. The Treasury has unveiled a draft policy aimed at bringing much-needed oversight to the country’s booming crypto market. With an ambitious budget of KSh 1.82 billion, this initiative seeks to curb money laundering, tax evasion, and security risks while fostering financial innovation.
Breaking Down the Budget
The proposed budget doesn’t just throw money at the issue—it takes a structured approach to regulation:
- KSh 1 billion – Establishing a legal framework to regulate digital assets.
- KSh 400 million – Promoting financial literacy and innovation in the virtual asset space.
- KSh 120 million – Consumer protection initiatives to safeguard crypto users.
- KSh 300 million – Addressing key risks like cybersecurity and data privacy.
Treasury Cabinet Secretary John Mbadi emphasized the policy’s adaptability, stating: “The policy takes account of regulatory approaches from various jurisdictions and provides a framework that is adaptive and flexible for domestic and international cooperation, compliance, consumer protection, financial innovations, and management of risks.”
A Growing Market with Growing Risks
Kenya’s cryptocurrency market is thriving, with over 700,000 Kenyans actively trading, and the market’s value is projected to hit US$40 million this year, according to data from Statista. However, this rapid growth has not been without challenges- similar to the expanding industry of betting sites in Kenya, where operators face ongoing scrutiny over licensing, taxation, and consumer safety.
For years, the sector has operated in a regulatory grey zone, with institutions like the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) voicing scepticism. The CBK began warning against cryptocurrency trading as early as 2015, and in 2020, these warnings intensified after a series of crypto-related scams.
Despite this, the market has flourished, driven by global trends and rising crypto asset prices. In 2023, the CMA proposed amendments to classify digital currencies as securities, paving the way for taxation. This effort paid off, with the Kenya Revenue Authority (KRA) collecting KSh 10 billion in 2023 from crypto dealers, thanks to a 3% tax on digital asset transfers and exchanges.
Laying the Foundation for Comprehensive Oversight
The regulatory push has been bolstered by the Blockchain Association of Kenya (BAK) and other stakeholders, who introduced the Virtual Assets Service Provider (VASP) Bill in March 2024. This proposed legislation aims to establish a dedicated office to oversee the crypto market in Kenya.
CS Mbadi further highlighted the global implications of regulating digital assets: “The cross-border nature of Virtual Assets and Virtual Assets Service Providers further compounds the risk, as noted in the VAs/VASPs ML/TF National Risk Assessment Report for Kenya, which was finalized in September 2023. These risks underscore the urgent need for a comprehensive legal and regulatory framework to govern VAs and VASPs to ensure the safety and integrity of Kenya’s financial system.”
