The International Monetary Fund (IMF) has urged Kenya to develop a “stronger regulatory framework” for cryptocurrencies to ensure “consumer protection” and “address risks related to Anti-Money Laundering (AML)” and “Combating the Financing of Terrorism (CFT).”
The recommendation was issued following a request from Kenya’s Capital Markets Authority (CMA) for guidance on handling the nation’s growing crypto market.
Recommendations For Strengthening Kenya’s Crypto Framework
Kenya has been relying on outdated financial regulations that do not adequately address the complexities of the crypto market. According to an IMF report, this regulatory gap has made the country vulnerable to crypto-related scams and illicit activities.
Furthermore, the IMF highlighted significant uncertainty among Kenyan lawmakers regarding how to regulate digital assets, emphasizing the need for a consistent and transparent approach aligned with international frameworks.
The IMF provided a series of recommendations aimed at addressing the regulatory gaps and creating a more predictable environment for the crydigital currency pto market in Kenya. These recommendations are divided into short-term and long-term actions.
In the short term (6 to 12 months), the IMF advised Kenya to conduct an assessment of its crypto market, establish better collaboration between regulatory authorities, and educate stakeholders about the risks and opportunities of digital assets.
Clarifying the scope of existing regulations to include crypto assets was also suggested to reduce legal ambiguity. For the medium and long term (12 to 24+ months), the IMF recommended the implementation of a comprehensive legal and licensing framework.
This would include defining digital currency assets clearly within financial laws to avoid inconsistencies such as conflicting definitions of digital currencies and virtual assets.
Additionally, strengthening supervisory resources and aligning Kenya’s crypto regulations with global standards like the Bali Fintech Agenda and the Financial Stability Board (FSB) framework were emphasized.
Promoting Cross-Border Cooperation and Consumer Protection
The IMF also advised Kenyan authorities to engage with international regulators to address risks associated with foreign digital currency exchanges operating within the country.
This recommendation highlights the importance of cross-border cooperation in managing enforcement challenges and mitigating the impact of international operations on Kenya’s financial stability.
Moreover, the IMF urged Kenyan regulators to move beyond reliance on surveys and questionnaires to assess the crypto market, advocating for more robust data collection and analysis methods.
According to the IMF, ensuring legal consistency and clarity while fostering innovation will be critical in creating a secure and transparent environment for digital currency users in Kenya. The regulator particularly wrote in the report:
The development of this framework should consider the unique challenges and opportunities within Kenya’s crypto market, ensuring it is robust, transparent, and capable of fostering innovation while protecting consumers and maintaining financial stability.
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