Kenya has become the latest country to craft legislative plans around cryptocurrency, according to one of the country’s largest media outlets.
The Standard, a widely read Kenyan newspaper, reported this week that Kenya’s National Treasury is preparing legislation which will legalise cryptocurrency.
John Mbadi, the Treasury Secretary in the Kenyan cabinet, announced the bill in a press conference earlier this week. The Treasury seeks to create a ‘fair, competitive, and stable market’ for Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs).
“Kenya’s financial sector is a beacon of innovation and growth in Africa,” Mbadi remarked, as reported by The Standard.
“The emergence and growth of Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) have given rise to innovations in the local and international financial system with dynamic opportunities and challenges.”
Is Kenya trying to catch up on crypto?
Kenya’s desire to legalise cryptocurrency has two likely motivating factors. First, as made clear by Mbadi and the country’s Treasury, is a desire to see it train its leading position as an innovative financial sector in Africa.
Africa has proven a fertile ground for alternative payment methods (APMs), with a strong appetite for these products among the continent’s consumer-base – much more so than in the traditional and more established financial markets of Western Europe and North America, where debit cards remain dominant.
This appetite may in part be driven by the fact that Africa has larger numbers of unbanked people than Europe and North America. Regardless, the impact is that instant payment methods have come to the forefront in Africa, similar to Latin America, as seen by Brazil’s Pix.
Kenya has been one of the countries at the forefront of this trend. The country’s M-Pesa instant payments system is very popular and has expanded beyond Kenya’s borders. It is now used in eight African countries, including Kenya, and has a total userbase of over 77 million.
The East African country likely wants to retain this podium position it has secured in payments innovation. Another motivating factor, however, is likely the global surge in crypto adoption and the sector’s increase in valuation.
Political developments in the US in particular are expected to drive crypto’s growth even further. Donald Trump’s inauguration as US president takes place on Monday 20 January, and the Republican politician and businessman is well known for having pro-crypto policies.
Simply put, Kenya may not want to miss out on crypto’s growing value while also ensuring it can play a role in its economic and financial ecosystem. It will have to acknowledge the risks that come with this, however, due to crypto’s tendency to fluctuate in value as well as the added risks of money laundering and fraud.
“The Government of Kenya is committed to creating the necessary legal and regulatory framework in order to leverage opportunities presented by VAs and VASPs while managing the resultant risks,” Mbadi was quoted by The Standard.