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Ruholamin Haqshanas
Author
Ruholamin Haqshanas
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The International Monetary Fund (IMF) has urged Kenya to establish a robust regulatory framework for cryptocurrencies to protect consumers and address risks related to Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).
In a technical assistance report released on January 8, the IMF outlined the shortcomings of Kenya’s current regulatory approach to crypto assets.
The report, commissioned by Kenya’s Capital Markets Authority (CMA), noted that the country relies on outdated regulations designed for traditional financial markets, which have limited applicability to the crypto landscape.
This has contributed to an increase in crypto-related scams and illicit activities in the country.
IMF Notes Regulatory Divide Among Lawmakers
During consultations in Nairobi, the IMF observed a lack of consensus among Kenyan lawmakers regarding crypto regulations.
To address this uncertainty, the IMF recommended that Kenya adopt a regulatory framework aligned with international standards, such as the Bali Fintech Agenda, the Financial Action Task Force (FATF) Recommendations for AML and CFT, and the Financial Stability Board’s Global Regulatory Framework for Crypto-Asset Activities.
The IMF emphasized that Kenya’s framework must balance innovation with consumer protection and financial stability.
In the short term (6–12 months), the IMF advised conducting empirical analyses, fostering collaboration among regulatory bodies, and clarifying the scope of crypto regulations.
Medium- to long-term measures (12–24+ months) include developing a legal and licensing framework, enhancing supervisory resources, and harmonizing regulations with global standards.
Additionally, the IMF recommended that Kenyan authorities move beyond surveys and questionnaires to gather comprehensive data on the crypto market.
It also urged lawmakers to define crypto assets clearly under financial laws, avoiding inconsistent terminology like “digital currency” versus “virtual asset.”
The IMF further advised Kenya to collaborate with foreign regulators to mitigate risks associated with international exchanges operating in the country and to enhance cross-border enforcement efforts.
Kenya Appoints Marathon Digital as Consultant
In May, the Kenyan government appointed U.S.-based Bitcoin mining company Marathon Digital as its consultant.
At the time, Kenyan President William Ruto explained that Marathon Digital would partner with the National Treasury and the Energy Ministry to address the energy requirements associated with cryptocurrency mining.
“Marathon Digital has been ushered to consult with the Treasury on the cryptocurrency regime and ministry of energy to discuss the energy needs in connection with the cryptocurrency mining,” stated President Ruto during the meeting with American investors.
Ruto’s decision marked a departure from the previous cautious stance on crypto taken by institutions like the CBK under former governor Patrick Njoroge.
Njoroge had strongly warned against crypto involvement, suggesting that considering Bitcoin as a reserve asset would be absurd. He even stated that he should be imprisoned if such a proposal were entertained.
