The adoption of cryptocurrency in Kenya is unlike many other countries in the developing world. Kenya is currently ranked the fourth-highest country with interest in cryptocurrency globally. The first three are Ukraine, Russia, and the United States.
Kenya also currently leads the way to be an African country with the highest search on cryptocurrencies.
However, there is the question of whether cryptocurrency is legal in Kenya. Numerous discussions have been raised concerning the usage, uptake, and regulatory framework governing cryptocurrency in Kenya.
As a major player in the cryptocurrency market, Remitano understands the impact of regulations on cryptocurrency prices. This article focuses on the current legal state of cryptocurrency in Kenya and what it means for its users.
The Central Bank of Kenya (CBK) issued a press release in 2015 stating its stand on the use of cryptocurrency. It declared that cryptocurrency is an unregulated digital currency not issued by the central bank or any government. It stated that Bitcoin and other cryptocurrencies like it are not legal tenders in Kenya.
It further mentioned that no entity had been licensed to offer money remittance products and services in Kenya using cryptocurrency. As such, it warned the citizens of Kenya that anyone who uses crypto does so at their peril. More so, it cautioned financial institutions about dealing with digital currencies or making transactions with institutions that deal with them.
The Central Bank of Kenya outlined the risks associated with trading or investing in digital currencies as follows:
In light of these, the Central Bank of Kenya admonished its citizens to desist from transacting in Bitcoin and similar products. Banks in Kenya are not allowed to open accounts for people known to be dealing in digital currency. This means converting Bitcoin to real cash or mobile money is a bit difficult for Kenyans.
Notwithstanding, no embargo was placed on cryptocurrency use. As such, Kenyans are free to buy and sell cryptocurrency. Moreover, the CBK governor mentioned that market players are being engaged globally to develop digital currencies.
Source: Hackernoon
The Government of Kenya does not have a definite stand where cryptocurrency is concerned. It neither accepts nor prohibits its use in the country. From all indications, the regulatory body only seems to proffer advice for citizens because of the volatility of these coins.
In 2018, the Capital Markets Authority (CMA) warned investors against partaking in Initial Coin Offerings (ICOs). It stated clearly that the body does not support the use of cryptocurrency. It, however, acknowledges and appreciates the need for Kenya to be on par with other nations in emerging technologies.
An economist told BBC that cryptocurrencies could facilitate and ensure that you do an unlimited number of transactions. He says, however, that it is volatile, has a lack of control, and is not acceptable across different jurisdictions. This impairs what a currency should normally do.
However, the Blockchain Association of Kenya (BAK) does not agree with this submission. Therefore, it is actively educating the country on the benefits of using digital currencies and Blockchain. According to this association, embracing technology is vital to the growth and development of every country.
The Central Bank of Kenya's notice of the risks of cryptocurrency did not scare the public. As of 2018, Kenyans were said to hold Bitcoins worth about $1.5 billion. That is approximately 2.3% of the country's GDP. The government's warnings notwithstanding, cryptocurrency is massively accepted by the public. Businesses in Nairobi now accept Bitcoin as payment for goods and services.
Like Senegal and Egypt, Kenya is working on establishing CBDCs.
Although it has not been fully implemented, Kenyans' ever-growing interest in digital currency makes that a potential possibility soon.
Source: Toptal
There are no cryptocurrency regulations presently in Kenya, like is the case with many countries worldwide. That is because technological innovations regulations are made following their nature. However, different laws cover cryptocurrency trading in Kenya, and the uncertainties of these regulations are hindering crypto growth in Kenya. The major laws are Kenya Money Remittance regulations and National Payments Systems Act (NPSA).
Cryptocurrency regulation in Kenya falls under three acts, namely:
The Central Bank of Kenya regulates this act. It provides the regulation and supervision of payment systems and service providers for connected purposes. The law brings all payment service providers into a single regulatory framework. The act gives the CBK direct oversight over service providers and their products. This is to ensure the safety and efficiency of their platforms.
This law regulates banking businesses that take deposits from the public. It can also be regarded as the major instrument for banking activities in Kenya.
The Central Bank of Kenya regulates the Money Remittance Act. It demands companies dealing with the transmission of money or its representation to have a license to practice. License to practice must be obtained from the Kenyan authorities. Otherwise, they would be suspended. This act was established based on the anonymity of Bitcoin trading on payment gateways.
Administered by the CMA, this act defines the term 'security and identifies its types. The types of securities include shares, debt instruments, rights options relating to other securities, futures relating to assets or property, depositary receipts, and asset-backed securities. It also states that securities may include any other instrument prescribed by the CMA.
CMA has declared that it would move forward with cryptocurrencies, its reservations nonetheless. According to the body, regulators need to devise a common approach towards handling crypto and ICOs. Moreover, it says that an alternative approach to outright disapproval of crypto would be to create a special unit to deal with issues aimed at regulating cryptocurrency.
The act stated, in 2019, that income accruing through a digital marketplace is now subject to tax. It captures goods and services supplied in the digital marketplace as taxable supplies for value-added tax purposes. P2P exchanges such as Remitano will have to remit taxes.
One of the major reasons the Kenyan government is skeptical about crypto is its anonymity. Cryptocurrency offers a huge opportunity to transfer funds cheaply and quickly, it agrees.
However, there is a significant risk of fraudulent misappropriation of the system, especially with money laundering and terrorist financing. This act aims to strengthen the integrity of the country's financial systems. As such, it provides and mandates entities to monitor and report obligations.
With new regulations in sight for cryptocurrencies on a global scale, it seems Kenya will be reviewing this act soon.
Source: Reuters
The question of whether or not cryptocurrency in Kenya is legal was addressed in 2015 by the CBK. The Central Bank of Kenya issued a notice over the use of cryptocurrency. They stated that cryptocurrency is not a legal tender and is not regulated by the country's laws. The caution further mentions the vulnerability one is exposed to by transacting with cryptocurrency.
However, going by the caution given by CBK and the AML regulations, the use of crypto does not fit into the definition of money laundering. That said, no laws declare the use of cryptocurrency as a criminal offense. More so, the Central Bank of Kenya only cautioned the public concerning the use of cryptocurrency. It does not out rightly condemn it.
The CBK does not place criminal sanctions on the possession of cryptocurrency. It only refuses to acknowledge it as a legal tender. Nevertheless, it reiterates that anyone who uses cryptocurrency does so at their peril. In the event of losing everything, legally or dubiously, no legal remedy would be provided.
Summarily, cryptocurrencies are currently not regulated in Kenya. They are neither backed by the Central Bank of Kenya nor the government. As such, they are not recognized, and there are no regulations put in place for them. Crypto experts believe the regulatory uncertainties concerning crypto adoption and use are slowing down digital money advancements in Kenya. Perhaps someday, Kenya will join South Africa in developing suitable regulations for all crypto stakeholders.
Interested in learning about crypto in Africa? It would be best if you find out about other top African countries adopting crypto in 2021.
