Push for cryptocurrency regulation gathers pace

Capital Markets Authority deputy director Justus Agoti addressing the media during the crypto conference. [Kanyiri Wahito, Standard]

Kenya’s push to regulate the fast-growing cryptocurrency and digital assets sector is gaining momentum as the Capital Markets Authority (CMA) moves to establish a formal framework to enhance oversight, accountability, and investor protection.

The proposed regulations come amid rising adoption of cryptocurrencies, blockchain technology and digital financial products in Kenya, with regulators seeking to strike a balance between innovation and market stability.

Speaking during a two-day crypto and digital assets conference in Nairobi, Capital Markets Authority Deputy Director for Market Development Justus Agoti said the financial sector must evolve alongside technological advancements while ensuring proper safeguards are in place.

“We are looking at how best we can support this market to grow in an orderly, safe and efficient manner while ensuring consumer protection and market integrity,” Agoti said.

He noted that financial markets globally have transformed significantly due to technology, forcing regulators to adapt to emerging innovations such as blockchain, tokenized assets, and digital currencies.

Under the proposed framework, all virtual asset service providers operating in Kenya will be required to register locally or establish representative offices in the country before obtaining licences.

 “Without a local presence, licensing will not be granted. This gives us a foothold on accountability. In case anything goes wrong, we must have a local office that can respond and cooperate with regulators,” he said.

According to the CMA, the move is intended to strengthen enforcement mechanisms and provide investors with channels for dispute resolution and regulatory support.

However, the proposed regulations have sparked concern among some industry players, particularly over licensing costs and compliance requirements, with fears that expensive regulations could discourage startups and slow innovation.

Agoti acknowledged the concerns but defended the need for oversight in the sector.

“Every functioning market has rules. In order for a market to operate efficiently, certain things have to be in place,” he said. “The question is not whether there is a cost, but whether that cost is proportional to the returns for those participating in the space,’’ he added.

VALR country director Peter Mwangi during a press briefing at the annual crypto conference. [Kanyiri Wahito, Standard]

Agoti noted that the CMA remains open to consultations with industry stakeholders to ensure regulations do not unintentionally drive innovators into unregulated markets.

He also addressed fears that taxation on digital assets could push traders toward informal peer-to-peer systems that are harder to monitor.

“There is what we call a fear tax in new sectors. Because it is a new area, there will be discomfort with any taxes that come into effect,’’ he said.

He stressed the need for continued engagement between regulators, the Kenya Revenue Authority and private sector players to develop a balanced taxation framework that supports innovation while protecting government revenue interests.

Industry stakeholders have welcomed Kenya’s efforts to create a legal framework for digital assets but cautioned against regulations that may weaken the country’s competitiveness in the global crypto market.

VALR Country Manager Peter Mwangi said Kenya’s strong digital culture and widespread use of mobile money place it among Africa’s most promising virtual asset markets.

“Kenya is increasingly becoming a very important market for virtual assets. Kenyans are very conversant with digital payments and online investments. That puts the country in a very unique position,” he said.

He revealed that VALR plans to expand operations into Kenya, citing growing investor interest and the country’s potential to become a leading digital finance hub.

“Kenya is properly placed to become the capital of virtual assets, not just in Africa but globally,” he said.