Financial marketsCrytocurrencyCrypto Transactions & Regulations in Kenya.

Kennnedy MuturiFebruary 4, 202354511 min

Among the top 10 countries globally for cryptocurrency holdings and blockchain-related transactions, Kenya is a leader in Africa. Kenya’s Bitcoin holdings accounted for over 2% of the country’s GDP in January 2018, which is a significant amount compared to the 10% of countries with a comparable amount of GDP invested in cryptocurrencies.


The market excitement over cryptocurrencies has shifted to a debate about the regulatory risk since these transactions aren’t border-defined, rationed supplies, questions about how valuable these fiat currencies are in these eased seasons, and the nature of virtual transactions, which have questions over proof of identity. Even as regulators try to find a balance between managing breakthrough dangers and avoiding being a hindrance to market-driven innovation, price fluctuations remain a concern to experts as they attempt to achieve a breakthrough. Many individuals differ on whether the regulatory structure is appropriate for decentralized virtual currency activities.

Kenya’s government neither encourages nor forbids the use of cryptocurrencies. “This is to alert the public that virtual currencies such as Bitcoin are not legal money in Kenya, and as a result, there is no protection if the platform that trades or stores the virtual currency goes out of business,” the Kenyan Central Bank said in December 2015 . Bitcoin and other cryptocurrencies should not be used for routine transactions as a result.

Financial institutions have been warned again by the CBK, this time to stay away from virtual currencies and entities that deal with them.


According to the Capital Market Authority (CMA), initial coin offerings (ICOs) are a risky entity for any ordinary person to invest in due to the volatile nature of its prices. On February 21, the CMA released a cautious alert.

Wiseman Talent Ventures Limited intended to generate funds from the public by issuing virtual handouts in coins form and consequently run a currency exchange program where investors could trade those coins. According to the CMA KeniCoin’s value has been portrayed as expanding exponentially since its launch, causing severe information asymmetry, liquidity issues, and fraud concerns .


Three years ago, the national government established the distribution technology to map out a plan that would summarize industries’ technological evolution, recognizing Kenya’s need to keep up with other countries in terms of new technology. Researchers made several recommendations in the report, but the following are particularly noteworthy:

  • The team’s proposal to the G20 Summit on the urgent desire to implement the digital currencies needs for digital currencies to improve worldwide economic inclusion advocates for a government-backed digital sovereign coin that is accessible and tradable worldwide.
  • Creating a legal and regulatory sandbox for Fintech
  • Using blockchain technology in the public sector in a variety of areas

Though the CBK appears to be taking a relaxed approach, the country’s governor claimed in an online interview with US media during Georgetown financial tech October 2020 that the country was in conversation with other global players about how to introduce Central Bank digital currency. Due to the growth of private cryptocurrency and the CBK’s perception of market isolation, this tendency has been sparked.

As a result, because cryptocurrencies are not officially regulated or backed by Kenya’s government or central bank, they are not recognized (CBK). On the other hand, recent developments show that cryptocurrencies should be regarded as securities rather than currencies.

Cryptocurrency Regulations:                                                  

Their anonymity allows users to escape disclosure rules such as know-your-client, which are placed on money exchanges to combat money illegal activities such as terrorism and laundering. Second, while official regulatory approaches vacillate between accepting and rejecting crypto assets, the global governance of the cryptocurrency industry has fragmented and stagnated. Cryptocurrency is also decentralized. The global flow of crypto assets thwarts efforts to focus on the assets’ sources’ nationality.

As cryptocurrencies rapidly replace fiat currency, they pose a danger to the global financial edifice built by multinational banking institutions.

In light of this, Kenyan legislation tends to be comprehensive and inclusive rather than restricted and specialized, resulting in licensing and regulatory categories that accommodate most financial technology advances like cryptocurrency.

Kenyan regulators, particularly the CBK and the CMA, have a reputation for being tough on regulation. They tend to broaden their regulations far and wide, and they have shown a willingness to include emerging technology in their laws.

The country lacks specific cryptocurrency legislation in place; instead, the country’s legal system applies. Financial technology (Fintech) innovations are regulated based on the type of invention. The following laws are in charge of governing them in general:

  • The National Payment System (NPS) act administered by the CBK.
  • The banking act
  • Money remittance regulations under the CBK.
  • Proceeds of Crime and Anti-Money Laundering Act 2009 (the AML Act)

The Capital Markets Act is administered by the CMA and the Kenya Information and Communication Act administered by the Communication Authority and Data Protection Act 2019.

More insightful articles on cryptocurrencies in Africa:

What impact do big tech CEOs have on Crypto markets?

Cash Telex- A Cryptocurrency For Africans By Africans

Kennnedy Muturi

Ken is a Quantitative Trader with experience in investments, quantitative finance, financial modelling and algorithmic trading in Global Investable Markets (GIM). He enjoys using Bayesian Statistics, Time Series and Machine Learning in developing Robust consistent Alphas in Equities Market, FX, ETPs and Derivatives instruments. He enjoys deep dives in understanding High Frequency Trading infrastructures and improving how the African financial markets work. He holds a Bachelor's in Actuarial Science from Strathmore Institute of Mathematical Sciences : An Executive Program in Algorithmic Trading (EPAT) certificate in Algo Trading from QuantInsti : A current MSc student in Financial Engineering at World Quant University.

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