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The International Monetary Fund (IMF) released a technical assistance report recommending that Kenya enhance its regulatory framework for cryptocurrency. The advice comes at the request of Kenya’s Capital Markets Authority (CMA), aiming to address the growing challenges of crypto-related scams, anti-money laundering (AML), and combating the financing of terrorism (CFT).
The IMF highlighted that Kenya’s current regulatory environment is outdated and ill-equipped to manage the rapidly evolving cryptocurrency market. Existing laws, designed for traditional financial markets, have “limited and no legally binding” influence on crypto activities, leading to a surge in fraudulent schemes and criminal activity.
During consultations in Nairobi, IMF staff observed a notable lack of consensus among Kenyan lawmakers on how best to regulate cryptocurrencies. In light of these challenges, the IMF emphasized the importance of aligning Kenya’s crypto regulations with international frameworks, such as the Bali Fintech Agenda and the Financial Action Task Force (FATF) Recommendations for AML and CFT. The agency recommended a regulatory environment that is transparent, robust, and capable of fostering innovation while safeguarding consumers and financial stability.
Key recommendations outlined by the IMF include short-term actions (within six to 12 months), such as conducting empirical market analysis, strengthening collaboration between regulatory authorities, and clarifying the scope of crypto regulations. For medium to long-term goals (12 to 24+ months), the IMF urged the implementation of a comprehensive legal and licensing framework, the enhancement of supervisory resources, and alignment with global standards.
Additionally, the IMF suggested that Kenya clearly define crypto assets within its financial laws, avoiding conflicting terms such as “digital currency” and “virtual asset.” This clarity would ensure legal consistency across the country’s crypto regulatory framework.
Finally, the IMF recommended that Kenyan authorities engage with foreign regulators to better manage risks posed by international crypto exchanges operating in Kenya and to foster cross-border cooperation for more effective enforcement.
Kenya’s move toward comprehensive crypto regulation is expected to mitigate risks while capitalizing on the opportunities blockchain and digital assets offer for the country’s economy.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
