Kenya Moves Forward with Crypto Trading Regulations Amid Grey List Concerns

Kenya is taking steps to introduce regulatory frameworks for overseeing cryptocurrency trading within its borders, amidst concerns about its status on the grey list.

This move is part of Kenya’s proactive approach to strengthen its financial system in anticipation of an evaluation by the Financial Action Task Force (FATF), an international body focused on combating money laundering and terrorism financing.

To this end, a technical working group has been established to advise the Treasury office on cryptocurrency-related matters. The group is currently formulating initial regulatory guidelines, which will then be presented to the Cabinet for approval.

Addressing this development, Saitoti Maika, Director-General of the Financial Reporting Centre (FRC), remarked:

“At present, a sectoral working group is developing a policy document to guide the creation of a legal framework that will outline the necessary actions and identify the regulator for digital asset providers. We may ultimately establish a dedicated regulator for virtual assets. We cannot ignore this issue. Failing to regulate increases our risk of facing consequences.”

Regulating cryptocurrencies will assist Kenya in bolstering the integrity of its financial system and reducing the likelihood of being placed on the FATF grey list—a classification reserved for countries subject to heightened scrutiny due to risks like money laundering and terrorism financing.

Presently, FATF’s grey list includes countries such as South Sudan, Tanzania, Uganda, and Sudan.

Despite being among the leading participants in peer-to-peer cryptocurrency platforms, Kenya currently lacks regulatory frameworks for cryptocurrency trading.

Following an assessment conducted by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) in 2022, FATF identified deficiencies in Kenya’s anti-money laundering, counter-terrorist financing, and proliferation financing (AML/CFT) systems. Subsequently, Kenya was given a 12-month period to rectify these issues, with October 2023 serving as the deadline.

In response, FATF will evaluate Kenya’s progress in an upcoming meeting. Any shortcomings identified during this assessment could potentially lead to Kenya’s placement on the FATF’s grey list.