Kenya Takes Pioneering Step Towards Self-Regulation in Crypto

Crypto regulations are among the issues that countries around the globe intend to resolve as early as possible. Though the crypto community initially found that it may stifle the sector’s growth, it soon realized it’s important for security until it hampers the growth. Kenyan agencies are taking steps towards regulating crypto assets and asked the Blockchain Association to come up with the format.

Kenya may be on the brink of setting a historic precedent by allowing industry experts to craft the regulatory framework for cryptocurrencies. The Blockchain Association of Kenya (BAK) announced that the National Assembly’s Departmental Committee on Finance and National Planning has tasked them with preparing the initial draft of a potential “virtual asset service provider’s bill.”

Turn of Events Before BAK’s Involvement

This momentous development unfolded on October 31 when the Committee on Finance and National Planning extended an invitation to BAK representatives to engage in discussions on the regulation of digital assets. Allan Kakai, BAK’s legal and policy director, shared insights from the meeting with local media, Mariblock.

In essence, BAK’s message to parliament is clear: Kenya, often referred to as the Silicon Savannah boasts a prominent position as one of the top three countries in Africa in terms of digital asset trading volume.

However, by establishing a coherent licensing and regulatory framework, the country can retain its competitive edge over other nations like Nigeria, South Africa, Botswana, Namibia, and Mauritius. This potential outflow of capital could divert crucial investments away from Kenya.

In response to BAK’s plea, the parliamentary committee granted them a two-month window to draft the proposed cryptocurrency bill. The committee’s official X (formerly Twitter) account succinctly stated that it “urged the Association to undertake robust public education on cryptocurrency trade to demystify it.”

Kenya’s legislative journey into crypto regulation has not been without controversy. In September 2023, Kenya introduced the Financial Act 2023, which imposed a 3% withholding tax on the “transfer or exchange value of the digital asset” for cryptocurrency exchanges.

The BAK had previously failed to dissuade lawmakers from implementing this crypto tax during a meeting in May. In response to this development, the BAK filed a complaint against the tax in the High Court of Kenya.

Kenya’s approach to cryptocurrencies has also involved taking a stern stance against the controversial digital identity crypto project, Worldcoin, which was co-founded by Sam Altman, the CEO of OpenAI. A parliamentary committee within Kenya’s government recommended the closure of the project’s operations in the country, citing concerns about personal data harvesting.

The Road Ahead for Kenya

As Kenya embarks on self-regulation for cryptocurrencies, it remains a noteworthy global experiment. Kenya could serve as a model for other countries if it remains successful in maintaining a balance between fostering cryptocurrency innovation and safeguarding against potential risks.

The evolution of this regulatory framework will be closely watched by the global crypto community as it navigates the ever-changing landscape of digital finance.