The digital assets and cryptocurrency sector in Kenya is advocating for new regulatory reforms to govern market entry for new participants.
The Blockchain Association of Kenya (BAK), a key industry lobby group, is proposing the establishment of a regulatory sandbox to oversee and regulate players in the digital asset industry before granting licenses.
Under the proposed Virtual Asset Service Provider (VASP) bill, which has been submitted to the National Assembly, BAK suggests allowing businesses dealing in digital assets to operate as commercial entities.
Michael Kimani, Chair of the Blockchain Association of Kenya, highlights that the bill outlines a licensing framework for crypto firms to register in Kenya, along with a sandbox for businesses to undergo testing before approval.
“Virtual currency businesses have faced challenges accessing the CMA sandbox due to the absence of a framework. The draft bill proposes a joint regulatory sandbox involving CBK, CMA, and other regulators to collectively approve businesses entering the sandbox,” explained Kimani.
The proposed Sandbox committee, to be gazetted by the Cabinet Secretary, will include representatives from the Capital Markets Authority, Central Bank of Kenya, Financial Reporting Centre, and other relevant bodies.
The BAK was tasked with drafting a framework to regulate the cryptocurrency industry, aiming to address concerns about fraudulent cryptocurrency schemes that have defrauded Kenyans.
However, due to increased interest from stakeholders such as government agencies, the association has extended the feedback period to ensure comprehensive input.
The bill addresses industry, consumer, and regulator concerns by proposing licensing, consumer protection, Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) frameworks, along with a regulatory sandbox.
Regulation of digital assets has been a global issue, with countries like the United States, Hong Kong, and Singapore leading efforts to regulate the industry. In Africa, Nigeria and South Africa have already implemented regulations to manage digital assets.
The proposed VASP Bill aims to position Kenya as a digital asset hub and could lead to increased tax revenues for the country’s National Treasury if enacted.
