As the usage of Virtual Assets (VAs) continues to gain momentum among Kenyans, the Ministry of National Treasury and Economic Planning has developed a comprehensive legal and regulatory framework to govern VAs and Virtual Asset Providers (VASPs) to ensure the safety and integrity of Kenya’s financial system.
A VA is a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes.
The draft National Policy on VAs and VASPs Bill, 2024, will provide a framework for oversight and development of the VAs ecosystem.
The policy seeks to guide the development of a legal framework governing VAs and VASPs, promote a fair and efficient market for VAs and VASPs, ensure sound risk management for VAs and VASPs, and promote financial literacy and innovation on VAs and VASPs.
The bill addresses cross-boundary risks associated with VAs such as Money Laundering (ML), Terrorism Financing (TF), Proliferation Financing (PF), tax evasion, fraud, cybercrime, weak governance, and consumer protection issues.
The Capital Market Authority and the Central Bank have been designated as the regulatory authorities by the bill.
Among other functions, they will be responsible for licensing VASPS, approving the issuance of an initial VA offering, approving the registration of a scheme involving an initial VA offering, regulating, supervising, and monitoring promoters of an initial VA offering, and ensuring financial soundness and stability of the financial system in respect of matters falling under the Act.
The sound legal and regulatory framework will catapult the country to be a leading player in the global digital finance ecosystem.
The Principal Secretary for the National Treasury, Dr. Chris Kiptoo, said in his speech read by Abednego Marube that the initiative aligns with the government’s commitment to foster financial innovation while ensuring consumer protection, financial stability, and prevention of financial crimes.
The rapid growth of VAs, Dr. Kiptoo noted, presents both opportunities and challenges. The opportunities are new avenues for economic empowerment, financial inclusion, and technological advancement.
The challenges are risks relating to market volatility, consumer protection, and potential misuse for illicit activities.
“Our objective is to strike a balance between innovation and regulation, fostering a safe and dynamic financial ecosystem,” stated the PS during a Public Participation for Mombasa, Kwale, Kilifi, Tana River, Lamu, and Taita Taveta counties.
Beatrice Mjomba, a resident of Taita Taveta County, lauded the development of the draft bill as many people were affected by the proliferation of VAs, which were largely unregulated.
For communities to embrace and adopt VAs, Mjomba advises the National Treasury to step up sensitisation efforts.
“We saw rich people being rendered money less and becoming very poor to an extent some of them cannot fend for themselves just because of these conmen businesses in line with VAs,” said Mjomba.
“I remember someone who lost millions of shillings because of crypto currencies. This was exacerbated by the lack of a legal framework to safeguard,” she added.
Feiswal Oketch from Mombasa said the bill will protect youths who are the most users of VAs. He wants the bill to address compensation in case someone loses his hard-earned money through the VASPs.
By Sadik Hassan