Kenya Legalizes Bitcoin and Crypto Trading, Aims to Balance Innovation and Risk Management

Kenya has made a significant move towards the future of digital finance by legalizing crypto trading. This comes after years of restrictions that banned digital currencies in East Africa.

However, despite the ban, people kept using digital assets on the underground market, showing the need for clear rules. Now, the government is building a legal framework to regulate crypto, including Bitcoin, and it aims to create a fair and competitive market for Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs).

This new legislation will also focus on risks like money laundering, terrorism financing, and fraud. As Treasury Cabinet Secretary John Mbadi announced this news, he pointed out that the government wants to balance innovation with risk management.

These regulations are meant to harness the benefits of digital assets while addressing the challenges. It's important to note that Kenya has been a leader in financial innovation with Safaricom's M-Pesa mobile money service, which revolutionized financial accessibility in the country back in 2007.

The Risks and Rewards of Crypto

While the benefits of digital assets are clear, Mbadi also pointed out the risks, including money laundering, tax evasion, fraud, cybercrime, and weak consumer protection.

He cited the national risk assessment report on Virtual Assets (VAs) and Virtual Asset Service Providers, which was finished in September 2023, to highlight these issues.

To tackle these challenges, the government wants to build a stable market that encourages innovation while protecting against financial crimes.

Kenya's Experience with Cryptocurrencies

Kenya's relationship with digital assets has been complicated. In 2015, the Central Bank warned against using them and banned virtual currencies as legal tender.

But a UN report from 2022 showed that almost 10% of Kenyans owned cryptocurrency. This shows that digital assets are still being used in the country, despite the ban.

Now, the government is finally responding to the people's needs and legalizing crypto trading. This move is expected to boost the digital asset industry in Kenya and bring it into the mainstream economy.

The nation plans to release its Draft National Policy on Virtual Assets and Virtual Asset Service Providers, which will guide the creation of a legal and regulatory system for the crypto industry.

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