Key Takeaways
- As per the IMF, Kenya’s reliance on traditional market regulations has left its crypto sector exposed to rising cases of scams
- IMF further noted a lack of agreement among Kenyan lawmakers on how to approach the issue
The International Monetary Fund (IMF) has urged Kenya to establish a clear regulatory framework for the crypto market, aimed at protecting consumers and addressing risks related to money laundering and terrorism financing. In a report published on January 8, following a request from Kenya’s Capital Markets Authority (CMA), the IMF identified gaps in the country’s current regulations, which it said are outdated and inadequate for overseeing digital assets.
According to the IMF, Kenya’s reliance on traditional market regulations has left its crypto sector exposed to rising cases of scams and other illicit activities. The report pointed out that existing laws have limited authority over digital assets, resulting in regulatory uncertainty. The IMF further noted a lack of agreement among Kenyan lawmakers on how to approach the issue, which has delayed the implementation of effective measures.
The IMF emphasized that the framework should foster innovation while ensuring transparency, consumer protection, and financial stability.
The global financial agency recommended that Kenya adopt a regulatory framework aligned with international standards, such as the Bali Fintech Agenda, FATF guidelines for anti-money laundering (AML) and combating the financing of terrorism (CFT), and the Financial Stability Board’s (FSB) global principles on cryptocurrency oversight.
To address regulatory challenges, the IMF proposed a phased approach. In the short term, it recommended conducting detailed studies of the cryptocurrency market, improving collaboration between regulatory agencies, and clarifying the scope of existing laws.
For the medium and long term, it suggested implementing a licensing system, strengthening supervisory resources, and aligning Kenya’s legal framework with global standards.
The report also stressed the importance of moving beyond surveys and questionnaires to gain a deeper understanding of the crypto market. It called for Kenyan authorities to clearly define cryptocurrencies under financial laws, avoiding conflicting terms like “digital currency” and “virtual asset” to ensure consistency and legal clarity.
The IMF advised Kenya to engage with international regulators to manage risks posed by global crypto exchanges operating in the country. Cross-border cooperation, the report stated, would help enhance enforcement efforts and provide better oversight of international crypto activities.
Kenya has been a leader in crypto adoption in Africa, with many citizens using digital assets for various financial transactions and investments.
As per reports, around 12 million East Africans are currently using crypto with digital asset experts noting that the potential is huge, especially for money transfer and stablecoins. As per a Statista report, the user penetration rate, of crypto is expected to reach 1.28% by 2025.
