Kenya’s government is making progress toward legalizing and regulating cryptocurrencies through a draft policy released by the National Treasury. This new framework aims to establish clear guidelines for virtual assets (VAs) and virtual asset service providers (VASPs), marking a shift from the government’s earlier skepticism about digital currencies.
John Mbadi Ng’ongo, the cabinet secretary for the National Treasury and Economic Planning, emphasized the government’s intent to balance innovation and risk management in the forward to the policy. He stated, “This policy guides the establishment of a sound legal and regulatory framework providing the fundamental foundation of a fair, competitive, and stable market for VAs and VASPs with the aim of fostering innovation, enhancing financial literacy, and ensuring sound risk management. The principal goal of the policy is to cement Kenya as a major player in the global digital finance ecosystem.”
This approach is a big pivot from 2015 when Kenya’s central bank issued a public notice warning against the use of cryptocurrencies. At the time, the bank cautioned that Bitcoin and other digital assets were not recognized as legal tender and lacked government protection.
Despite the absence of formal regulations, cryptocurrencies have gained popularity in Kenya. Reports from local outlets like The Standard highlight widespread public use of digital assets in unregulated environments, showing the need for a regulatory framework to protect users and foster innovation. Already three years ago, a U.N. report revealed that crypto adoption in Kenya is the highest in Africa, with 8.5% of its population holding a cryptocurrency.