Last updated on February 24th, 2025 at 06:12 am
Nairobi, January 8, 2025 – The International Monetary Fund has published a detailed report that it expects Kenya to develop a comprehensive and predictable regulatory framework for its cryptocurrency sector. The report includes recommendations to harmonize Kenya’s policies with the global standards, enhance financial safety, and address potential risks in the rapidly growing digital asset industry.
IMF Technical Assistance Report: Key Observations
The IMF’s 43-page Technical Assistance Report, published on January 8, highlights several critical issues in Kenya’s cryptocurrency ecosystem:
1. Absence of a Clear Regulatory Framework
Kenya currently lacks a specific set of laws governing cryptocurrency activities, leaving the sector susceptible to misuse. The report underscores the importance of creating legal clarity to facilitate healthy industry growth and safeguard against illicit activities.
2. Importance of Global Alignment
The IMF recommended Kenya to adapt international standards including;
Financial Stability Board’s (FSB) Global Regulatory Framework; this defines best practices to be adopted on digital assets management
IOSCO Policy Recommendations, the policy guidelines focus on the regulation of the digital asset market for it to be more transparent and responsible
3. Enhancing Financial Security
Kenya should be strengthened with appropriate anti-money laundering (AML) and counter-terror financing (CTF). These are among the steps considered critical in curtailing the abuse of cryptocurrencies to serve illicit objectives.
IMF’s Interaction with Kenyan Government
1. Joint Review
February 2024 saw the Monetary and Capital Markets Department (MCM) and Legal Department (LEG) of the IMF visiting Nairobi. Their objective was to review Kenya’s cryptocurrency market and help the Capital Markets Authority (CMA) in developing regulatory guidelines.
2. Suggestions for Market Review
The IMF recommended that there should be:
A proper insight into the size, nature, and risks of Kenya’s cryptocurrency market.
Accurate record keeping to inform appropriate decision-making and policy design.
Kenya’s Current Cryptocurrency Landscape
1. Legal Status of Crypto
Trading, investment, and the holding of cryptocurrencies are not prohibited in Kenya. Lack of specific rules, however creates uncertainty for participants.
2. Taxation
Kenya has established a taxation system for digital assets. The digital asset tax, effected via the Finance Act 2023, is a 3% tax charged upon transferring or exchanging digital assets. This has gained sizeable revenues: KRA collected KSh 10 billion in FY 2023-24, approximately $77.3 million or ₹653 crore.
3. High Adoption Rate
Kenya is the biggest market for crypto users in Africa. A United Nations report released in 2022 showed more than 4 million crypto owners in the country, indicating that the sector was growing fast.
Recommendations for Kenya’s Crypto Future
1. Protecting Users
Comprehensive regulations should be aimed at protecting Kenya’s growing crypto community from scams, fraud, and financial losses.
2. Consensus Building
The IMF called on the Kenyan authorities to collaborate with stakeholders for a consensus in the market size, risks, and regulatory priorities.
3. Strong Policy Framework
Well-defined policies will ensure that Kenya can be innovative while having financial safety, setting a model in Africa for regulating cryptocurrencies.
The IMF report is a clear step toward providing a safe, well-regulated cryptocurrency sector for Kenya. When Kenya adopts this recommendation and adheres to international requirements, it protects its users by leveraging the advantage of digital assets. The publication of the report indicates Kenya’s interest in setting up a functional, transparent, and inclusive industry.