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Treasury to spend Sh1.8bn on crafting crypto laws
Kenya is keen to regulate crypto assets as part of efforts to update its anti-money laundering and combating terrorism financing strategies to get out of the Financial Action Task Force grey list.
The National Treasury estimates that the country will require Sh1.82 billion to formulate and publicise regulations for the use of cryptocurrency and digital tokens in the country.
The estimates contained in the Treasury’s Draft National Policy on Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs), show the bulk of the amount will be spent on drafting the regulations as the country pushes to curb tax evasion, fraud and cybercrime amid the growing use of cryptocurrencies.
A VA is a digital representation of value that can be traded or transferred digitally and used for payment, investment or for other purposes as may arise.
The implementation matrix shows that Treasury plans to spend Sh800 million on activities such as developing a comprehensive and progressive law aligned with international standards, anti-money laundering, combating the financing of terrorism and counter proliferation financing requirements and best practices.
The Treasury says coming up with the law will require the input of about 27 institutions including the Central Bank of Kenya, Capital Markets Authority, Insurance Regulatory Authority, Financial Reporting Centre, Office of Data Protection Commissioner, State Law Office and National Intelligence Service.
The institutions will also formulate standards and procedures to establish and govern VA activities and VASPs, establish a framework for consumer protection and market conduct and set up a capacity-building framework for stakeholders on regulation, supervision, and market development for VA activities and VASPs.
The Treasury says Sh200 million will be used to establish a framework for national and cross-border cooperation and information sharing on VA activities and VASPs, while Sh120 million will go to develop mechanisms to guide consumer protection, market conduct and operations.
About Sh300 million will be spent on establishing a framework to guide risk management for VAs and VASPs, while Sh200 million will be used to develop a framework to promote innovation and research in the VAs ecosystem. A further Sh200 million will go into developing a framework for awareness and capacity building.
“The implementation of this policy will be funded by the National Government. Various ministries, departments, agencies, and counties will mainstream the implementation into their annual work plans and budgets,” says Treasury.
The Treasury draft borrows from other countries in Africa and beyond whose policies provide a framework that is adaptive and flexible for domestic and international cooperation, balancing between compliance and promoting financial innovation.
Kenya is keen to regulate crypto assets as part of efforts to update its anti-money laundering and combating terrorism financing strategies to get out of the Financial Action Task Force grey list - a listing of countries at risk of money laundering. The country was grey listed on February 23, 2024.
The country’s financial sector has seen a heightened pace of sophistication with developments such as mobile money banking, online betting, digital credit, online foreign exchange trading and the use of cryptocurrencies all rendering the traditional regulations inadequate in safeguarding the integrity of financial transactions.