Kenya’s Attempt at Regulating Cryptocurrency: What They Mean for You

What is Cryptocurrency really about?

Cryptocurrency is a form of digital or virtual currency that uses cryptography to secure transactions, control the creation of new units, and verify asset transfers. Unlike traditional currencies issued by governments (such as the US dollar or Kenyan shilling), cryptocurrencies operate on decentralized networks based on blockchain technology.

Key Aspect of Cryptocurrency

Cryptocurrencies are decentralized digital currencies that operate without a central authority, relying on a network of computers (nodes) to verify transactions.

Cryptography secures transactions and verifies user identities while maintaining privacy. Peer-to-peer transactions allow users to send and receive payments directly, eliminating intermediaries and reducing costs.

Popular Cryptocurrencies:

• Bitcoin (BTC): The first and most well-known cryptocurrency.
• Ethereum (ETH): A platform that allows developers to build decentralized applications (DApps) and smart contracts.
• Binance Coin (BNB): A utility token used on the Binance exchange for reduced trading fees and transactions.
• Ripple (XRP): Designed for fast, low-cost cross-border payments.

Upcoming Regulations in Kenya about Cryptocurrency

Kenya is actively working to regulate the cryptocurrency sector. The National Treasury has released two key documents for public consultation:

1. Draft National Policy on Virtual Assets and Virtual Asset Service Providers
2. Virtual Assets Service Providers Bill, 2025

These documents aim to establish a comprehensive legal framework addressing issues such as money laundering, terrorism financing, and consumer protection.

The Draft National Policy on Virtual Assets and Virtual Asset Service Providers represents a bold step toward embracing the future of digital finance and innovation. As virtual assets such as cryptocurrencies, digital tokens, and blockchain-based assets gain global traction, this policy aims to position the country as a leader in this transformative sector. The policy balances innovation with safeguards, ensuring the virtual asset industry

thrives while addressing critical risks like money laundering and fraud. Its objectives are clear: establish a regulatory framework, protect consumers, promote innovation, mitigate misuse, and align with international standards such as the Financial Action Task Force (FATF) guidelines.

At the heart of the policy is the creation of a licensing regime for Virtual Asset Service Providers (VASPs), including exchanges, wallet providers, and custodial services. This framework emphasizes transparency, robust operational standards, and the implementation of Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) measures. The policy also underscores the importance of educating the public about virtual assets, addressing risks, and fostering their integration into existing financial systems. With provisions for taxation, cybersecurity, and interoperability, the policy aims to make virtual assets not just a niche interest but a vital component of the national economy.

Complementing the policy, the Virtual Assets Service Providers Bill, 2025, provides the legal foundation to regulate and oversee the operations of VASPs. This groundbreaking legislation introduces comprehensive measures to ensure that VASPs operate securely and responsibly. It defines the scope of virtual assets, establishes licensing requirements, and mandates strict compliance with AML and CFT protocols. To protect consumers, the bill enforces transparency in fees, risks, and terms of service, while also providing mechanisms for resolving disputes. Robust data privacy and cybersecurity requirements further safeguard the interests of users.

The bill also empowers regulators with the authority to supervise and enforce compliance, ensuring the industry adheres to the highest standards. Taxation and reporting obligations are clearly outlined, offering a transparent approach to revenue generation while maintaining a business-friendly environment. Additionally, the bill recognizes the importance of international collaboration in tackling cross-border challenges, aligning the country’s efforts with global best practices.

Together, the National Policy and the Virtual Assets Service Providers Bill present an exciting opportunity to unlock the potential of virtual assets. They lay the groundwork for a secure, transparent, and innovative digital economy, fostering trust among stakeholders while enabling the nation to harness the full potential of blockchain technology and digital finance. By championing this forward-looking approach, the country aspires to not only regulate but also inspire growth in the dynamic world of virtual assets.

What are the advantages and disadvantages of the upcoming regulations?

Advantages of the Upcoming Cryptocurrency Regulations in Kenya:

1. Consumer Protection:Regulations will help protect users from scams, fraud, and loss of funds by ensuring crypto service providers adhere to specific standards.
2. Market Stability and Credibility: Regulatory oversight can reduce market manipulation and illegal activities, promoting a safer environment for investors. It will attract institutional investors and financial institutions, enhancing the legitimacy of the sector.
3. Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Compliance: Regulations will introduce measures to combat illicit activities such as money laundering and terrorism financing through cryptocurrencies. This alignment with global financial standards could help Kenya avoid being blacklisted by international regulatory bodies.
4. Increased Adoption and Innovation: Clear regulations may encourage more businesses and individuals to use cryptocurrencies with confidence, boosting financial inclusion.
5. Government Revenue Generation: Through taxation and licensing of cryptocurrency businesses, the government can generate additional revenue streams. Proper tax guidelines can ensure fair contributions from the crypto sector to the economy.
6. Investor Confidence and Foreign Investment: A regulated environment attracts foreign investors who seek security and transparency before committing funds to a market.

Disadvantages of the Upcoming Cryptocurrency Regulations in Kenya:

1. Increased Compliance Costs: Crypto businesses may face higher operational costs due to licensing fees, reporting obligations, and adherence to regulatory requirements. This could discourage small startups and entrepreneurs from entering the market.
2. Reduced Privacy:Regulations may introduce Know Your Customer (KYC) and Anti-Money Laundering (AML) measures, limiting the anonymity that many users value in cryptocurrencies.Users may feel their financial freedom and privacy are being compromised.
3. Innovation Stifling: Overly stringent regulations could stifle creativity and technological innovation in the blockchain space. Entrepreneurs may choose to move their businesses to less regulated jurisdictions.
4. Possible Exit of Global Crypto Players: Some international crypto exchanges and service providers might exit the Kenyan market if the regulatory requirements are too complex or costly to comply with. This could limit the availability of global crypto services to Kenyan users.
5. Bureaucratic Challenges: Regulatory enforcement could introduce red tape and delays, making it harder for businesses to operate efficiently. Corruption and mismanagement could hinder the proper implementation of the laws.
6. Tax Burden on Users and Businesses: The introduction of taxes on crypto transactions might discourage adoption among individuals and businesses. Higher costs could drive people towards informal or unregulated crypto trading options

How can we achieve Regulatory Clarity?

Achieving regulatory clarity in the cryptocurrency sector requires a well-balanced approach that fosters innovation while ensuring compliance, security, and consumer protection. To accomplish this, stakeholders—including government bodies, industry players, and consumers—must collaborate to create transparent, fair, and adaptive regulatory frameworks.

How might it affect mainstream media?

The upcoming cryptocurrency regulations in Kenya will have a significant impact on mainstream media, influencing how crypto-related content is reported, consumed, and monetized. These changes may introduce both opportunities and challenges for media organizations covering financial and technological developments.

Let’s look at a chart of bitcoin, shooting up over the last few months.

Bitcoin has experienced a significant surge over the past few months, reaching new all-time highs. Below is the latest price chart illustrating its recent performance:

As of January 21, 2025, Bitcoin is trading at approximately $103,759. Notably, it achieved an intraday high of $108,619 and a low of $100,145. This upward momentum has been influenced by several factors:

• Regulatory Developments: The anticipation of favorable cryptocurrency policies under President Donald Trump's administration has boosted investor confidence. Plans for executive orders focusing on the digital asset industry, including policies on crypto de-banking and accounting, have signaled a potentially more supportive regulatory environment.
• Market Dynamics: Despite reaching an all-time high of over $109,000 on January 20, 2025, Bitcoin's price experienced volatility, retreating to around $102,800. This fluctuation underscores the asset's inherent volatility, influenced by market sentiment and external events.

Cryptocurrency Under the Trump Administration

President Donald Trump's administration has signalled a shift towards a more crypto-friendly stance. Reports indicate plans to use executive powers to reduce regulatory burdens on cryptocurrency companies, potentially allowing banks to trade and invest in digital assets.

Jeremy Allaire, CEO of Circle, anticipates that such executive orders could facilitate banks in adding cryptocurrencies to their portfolios, benefiting entities like Circle, the issuer of the USDC stablecoin.

Despite these anticipated policy changes, President Trump's inauguration speech did not address cryptocurrencies, leading to a market correction.

Bitcoin, which had reached an all-time high of over $109,000, experienced a decline following the omission.

Cryptocurrency Regulations in Various Jurisdictions

Globally, cryptocurrency regulations vary significantly:

• Japan: Recognizes cryptocurrencies as legal property under the Payment Services Act. Crypto exchanges must register with the Financial Services Agency and comply with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) obligations.
• European Union: The EU is actively working on comprehensive regulations, with the Markets in Crypto-Assets (MiCA) regulation aiming to provide legal clarity and consumer protection across member states.
• China: Maintains a stringent stance, implementing a general ban on cryptocurrency trading and initial coin offerings (ICOs), while promoting the development of its own central bank digital currency (CBDC).
• United States: Prior to the current administration, the U.S. had a fragmented regulatory approach, with different agencies providing varying guidelines. The Securities and Exchange Commission (SEC) has been particularly active in regulating crypto assets deemed securities.

According to the Atlantic Council, among 60 countries studied, cryptocurrency is legal in 33, partially banned in 17, and generally banned in 10. In twelve G20 countries, representing over 57% of the world’s GDP, cryptocurrencies are fully legal, with regulation under consideration in all G20 countries.

How is it substantive to us?

The evolving cryptocurrency regulations under the Trump administration and in various global jurisdictions are highly substantive to Kenya for several reasons. Kenya has a rapidly growing crypto ecosystem, with increasing adoption in areas such as remittances, digital payments, and decentralized finance (DeFi). Understanding global regulatory trends can help shape Kenya’s regulatory approach, attract investment, and ensure local compliance with international standards.

1. Impact on Kenyan Crypto Regulations and Policy Development

• Influence from Global Trends: Kenya’s regulators, such as the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA), often look to global leaders like the U.S. and the EU when crafting policies.
• If the U.S. under Trump adopts a crypto-friendly stance, Kenya may consider loosening its own regulatory approach to remain competitive and attract investment.
• Alignment with international frameworks (e.g., FATF anti-money laundering standards) will be crucial for Kenya to remain an attractive destination for crypto businesses.
• Potential for Regulatory Clarity: Global regulations can serve as a reference for Kenya in formulating clearer tax policies, compliance requirements, and legal frameworks for crypto service providers. Kenya’s government can avoid regulatory uncertainty by learning from countries with established legal structures like Japan and the EU (MiCA regulation).

2. Cross-Border Transactions and Remittances

• Kenya's Heavy Dependence on Remittances: Kenyans living abroad send significant remittances home, with crypto providing a cheaper and faster alternative to traditional banking. If countries like the U.S. regulate crypto in a favorable way, it could boost cross-border crypto remittances into Kenya, lowering costs compared to traditional money transfer services. On the other hand, if stricter compliance rules are enforced (such as stricter KYC/AML requirements), Kenyan crypto users may face challenges accessing global exchanges.
• Diaspora Engagement: Favourable regulations abroad can encourage more Kenyan diaspora to use crypto for remittances, increasing financial inclusion locally. Conversely, heavy regulations in jurisdictions like the U.S. might force Kenyan users to switch back to traditional remittance channels, increasing costs.

3. Economic Growth and Investment Opportunities

• Attracting Foreign Investments: If major economies like the U.S. implement crypto-friendly policies, Kenya could position itself as a crypto-friendly hub in Africa to attract foreign investors.
• Kenya could benefit from partnerships with international blockchain startups looking for an African base, bringing employment and financial growth.
• Local Adoption of Stablecoins and CBDCs: As the U.S. considers regulatory clarity for stablecoins (such as Circle's USDC), Kenya could see increased use of stablecoins for e-commerce and savings, offering more financial stability than volatile cryptocurrencies like Bitcoin. Kenya’s own efforts to explore a Central Bank Digital Currency (CBDC) may be influenced by how the U.S. and other countries handle their digital currencies.

4. Innovation and Business Expansion for Kenyan Startups

• Global Regulatory Compliance for Kenyan Startups: Kenyan blockchain startups will need to comply with global regulatory standards to access international markets, funding, and partnerships. U.S. policies on crypto taxation, stablecoins, and DeFi could impact Kenyan startups that rely on partnerships with American firms or platforms.
• Regulatory Sandboxes: Learning from countries like Singapore and the U.K., Kenya could create a regulatory sandbox to allow crypto startups to test products with minimal regulatory risk. Trump's potential deregulation in the U.S. could inspire Kenya to introduce innovation-friendly policies to support local fintech startups.

5. Financial Inclusion and Consumer Protection

• Crypto Adoption Among the Unbanked: Kenya has a high rate of mobile money usage (e.g., M-Pesa), and crypto presents an opportunity to further financial inclusion. However, without proper regulations informed by global trends, consumers risk exposure to scams, fraud, and loss of funds in unregulated platforms. If global regulations favour consumer protection, Kenya may follow suit, ensuring safeguards for its citizens.

6. Taxation and Government Revenue

• Learning from International Tax Models: With countries like the U.S. implementing clearer tax regulations, Kenya could follow by creating crypto tax policies, ensuring revenue collection from growing crypto transactions. Proper taxation could generate significant revenue for the government without discouraging innovation.
• Challenges in Enforcement: If Kenya does not adopt appropriate regulations aligned with international standards, it risks losing potential tax revenue due to crypto’s decentralized nature. Businesses might shift to offshore jurisdictions to avoid unclear tax rules.

Conclusion

Kenya's proactive approach to crypto regulation is a step in the right direction. While challenges exist, the opportunities for economic growth, innovation, and financial inclusion are immense. By staying informed and engaging in the regulatory process, businesses and individuals can position themselves for success in the evolving digital economy.

With Kenya’s love for innovation and the entrepreneurial spirit, the crypto regulations could either pave the way for a prosperous digital future or scare off key players. Either way, let’s hope we don’t end up trading goat NFTs in secret back alleys. ??

What are your thoughts on Kenya's crypto regulations? Join the conversation and share your insights!