Kenya Drafts Coverage to Legalize Cryptocurrencies, Develop Digital Financial system

Kenya is turning the page on its restrictive
cryptocurrency policies with plans to legalize virtual assets. The Treasury
Cabinet Secretary, John Mbadi, announced the move today (Friday) in what could
mark a shift in the East African country’s financial landscape.

Despite a longstanding ban, cryptocurrency usage has
flourished underground. Now, the government aims to harness the benefits of
digital assets through a robust regulatory framework, local media publication
The Standard reported.

Mbadi emphasized the need for Kenya to balance
innovation with regulatory oversight. He mentioned that the emergence and
growth of virtual assets (VA) and virtual asset service providers (VASPs) have boosted innovations in the financial system, which have created dynamic opportunities
and challenges.

A Policy Rooted in Innovation and Caution

The draft policy intends to establish a fair,
competitive market for cryptocurrencies while addressing risks like money
laundering, terrorism financing, and consumer fraud. It draws inspiration from
other jurisdictions and aims to make Kenya a significant player in the global
digital finance ecosystem.

Kenya’s pioneering role in mobile money services, such
as the launch of M-Pesa in 2007, could serve as a foundation for its crypto
ambitions. Mbadi highlighted the groundbreaking mobile money revolution to
robust financial systems, where the country has strived for financial inclusion.

The Kenyan government now hopes to replicate this
success by leveraging blockchain technology and digital currencies to drive
economic growth. The decentralized nature of
cryptocurrencies presents unique challenges.

🔥 JUST IN: Kenyan Finance Minister John Mbadi reveals plans to draft legislation to legalize cryptocurrency pic.twitter.com/nldurpauK8

— Crypto Briefing (@Crypto_Briefing) January 10, 2025

Kenya’s 2023 National Risk Assessment highlighted
vulnerabilities, including tax evasion, cybercrime, and weak governance. The
policy draft seeks to mitigate these risks through domestic and international
cooperation, compliance frameworks, and enhanced financial literacy.

Mbadi stressed that cryptocurrencies gained traction
due to their efficiency in cross-border transactions and investment appeal.
However, the unregulated market has led to concerns over fraud and uncontrolled
capital flight.

A Growing Trend in Africa

Kenya joins a growing list of nations, including
Morocco and South Africa, exploring cryptocurrency regulations. The rapid
adoption of virtual assets across Africa underscores the need for legal
clarity.

Data shows that younger Kenyans, aged 18 to 40, are
particularly drawn to cryptocurrencies, viewing them as viable alternatives for
investment and value transfer.

Kenya’s draft policy is a significant step toward
aligning the country with global crypto standards. “Adopting this policy
establishes a secure and well-regulated environment for VAs and VASPs in
Kenya,” Mbadi stated. The framework promises to guide regulators, protect
consumers, and encourage innovation responsibly.

This article was written by Jared Kirui at www.financemagnates.com.



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