Exchequer chief warns pm cryptos

National Treasury Cabinet Secretary Njuguna Ndung’u has issued a warning to Kenyans against engaging in cryptocurrency trade, citing a lack of a clear regulatory framework.

Ndung’u emphasised that if individuals incur losses in cryptocurrency trading, the government cannot be held responsible.

Addressing the potential threat to Kenya’s economy in Parliament, Ndung’u clarified that, although cryptocurrency is not the primary trading currency in the country currently, its dominance could impact the value of the shilling.

Virtual assets

“A fiat currency such as the Kenyan shilling we have the power to control demand and supply, this crypto currency such as bitcoin no one knows who owns it and how it is generated,” he said. “If you are holding a coin of this, know that you’re doing it at your own risk.”

Despite this, he reassured the public that the government is taking steps to develop a regulatory and monitoring framework for Virtual Assets (VA) and Virtual Assets Service Providers (VASPs). A multi-agency technical working group, including representatives from the Central Bank of Kenya (CBK), has been formed for this purpose.

Ndung’u acknowledged the absence of a regulatory framework for crypto assets in Kenya, making it challenging to monitor and regulate cryptocurrency trading effectively. The decision to develop regulations stems from a study conducted in September 2023 on Money Laundering/Terrorism Financing (ML/TF) risks associated with VAs and VASPs.

The study recommended regulation to address these risks, along with considerations for consumer protection, data privacy, and governance.

CBK Assistant Director of Banking Supervision Matu Mugo said the use of cryptocurrencies, especially in regard to their implications in the fight against terrorism and consumer protection, raises a red flag over their suitability.

Mugo noted that the study found medium risks of money laundering, low risks of terrorism impact, and identified consumer protection as an area requiring attention.

Highlighting the need for public discussion, Ndung’u and Mugo emphasized the importance of consulting the wider public on the legal and regulatory framework for VAs/VASPs through a consultative policy paper.

This warning follows the government’s suspension of the WorldCoin cryptocurrency project in August, pending inquiries into the safety of the harvested data.

The Interior Cabinet Secretary, Kithure Kindiki, emphasized that the suspension would remain in effect until assurances of the safety and integrity of financial transactions were provided.

Notably, the Central Bank of Kenya had previously issued a public notice in December 2015 warning against the use of virtual currencies like Bitcoin, emphasizing their lack of legal tender status in Kenya and the absence of protection in case of platform failures or closures.