Kenya has begun taking steps to regulate digital assets within its borders, as part of the government’s aims to combat scams, fraudulent investments, and money laundering associated with cryptocurrencies.
The initiative follows the passing of its Finance Act, which imposes a 3% tax on the revenue generated from citizens trading digital assets. In the wake of Nigeria’s demand for the extradition of Nadeem Anjarwalla, a Binance executive accused of tax evasion, Kenya’s government seeks to avoid such crimes by establishing a multiagency technical working group.
This group is tasked with developing a regulatory and monitoring framework for the usage of cryptocurrencies, also known as Virtual Assets (VAs), and entities providing crypto asset services, referred to as Virtual Asset Service Providers (VASPs).
The decision to regulate cryptocurrencies stems from risk assessments conducted by Kenya’s Financial Reporting Centre (FRC) in September 2023, which highlighted the potential for VAs and VASPs to be exploited for illicit activities such as money laundering, terrorism financing, fraud, scams, and data theft. Similar concerns were echoed in a 2022 report by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), urging Kenya to establish regulations to combat financial crimes associated with virtual assets.
Recent revelations by the Directorate of Criminal Investigations (DCI) showed irregular inflows of at least KES 2.5 billion ($18.6 million) detected in 2023 through M-Pesa withdrawals linked to the activities of the cryptocurrency Worldcoin. This highlights why it’s urgent to regulate cryptocurrencies. The government has also suspended Worldcoin’s operations in the country following the discovery.
Kenya’s move towards cryptocurrency regulation aligns with global efforts to address the risks posed by digital assets. As the lack of a regulatory framework exposes consumers to potential fraud and scams, establishing clear guidelines for cryptocurrency operations is essential to safeguarding the interests of investors and ensuring financial integrity.
Meanwhile, in Nigeria, Binance, the leading cryptocurrency exchange platform, and its executives face charges for tax evasion, currency speculation, and money laundering allegations totaling $35.4 million.
