By 
Kenya is actively working on crafting new regulations to oversee cryptocurrency trading, particularly in popular digital assets like Bitcoin. This initiative is driven by growing concerns that the surge in virtual asset transactions within the country could elevate the risks of money laundering and terrorism financing.
A specialized technical working group, appointed to advise the Treasury on cryptocurrency matters, is currently in the process of formulating draft regulations. Once finalized, these regulations will be presented to the Cabinet for adoption, representing a significant move to address vulnerabilities in Kenya’s financial system.
The Financial Reporting Centre (FRC) director-general, Saitoti Maika, revealed that the sectoral working group is developing a policy document to guide the establishment of a legal framework. This framework will outline the regulatory requirements for digital asset providers, potentially leading to the creation of a stand-alone regulator for virtual assets.
Mr. Maika emphasized the need for regulatory measures, stating, “We can’t bury our heads in the sand. The more we fail to regulate, the more we risk being punished.” Despite various reports, including one by Chainalysis, ranking Kenya among top peer-to-peer cryptocurrency platforms, the country currently lacks comprehensive regulations for cryptocurrency trading.
The absence of regulations has led to concerns about the potential misuse of cryptocurrencies for illicit activities such as money laundering and terrorism financing. The move to regulate cryptocurrency trading aligns with efforts to enhance the integrity of Kenya’s financial system and mitigate the risk of being placed on the Financial Action Task Force (FATF) grey list.
The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), an associate member of FATF, emphasizes the importance of a robust financial intelligence unit, which is represented by the Financial Reporting Centre in Kenya.
The regulatory interventions, such as those proposed for cryptocurrencies, aim to strengthen Kenya’s financial system and prevent it from facing increased scrutiny on the global stage. Countries on the FATF grey list undergo heightened monitoring due to concerns related to money laundering and terrorism financing risks.
Kenya’s engagement with cryptocurrency has raised questions about the extent to which the proceeds from these activities enter the financial system. Mr. Maika highlighted the need to address these risks as the country evolves.
Kenya’s counterparts in the East African Community, including Uganda, South Sudan, and Tanzania, are already on the FATF’s grey list, highlighting the regional importance of addressing anti-money laundering and counter-terrorism financing challenges.
As Kenya awaits the FATF’s evaluation of its progress in improving its financial system’s integrity, the country continues to advance its regulatory framework to ensure the responsible use of cryptocurrencies and to align with global standards for financial security.
Comments