Parliament Tasks BAK With Crafting Crypto Regulation Bill

Parliament has called upon the Blockchain Association of Kenya (BAK) to spearhead the creation of the initial draft for what could potentially become the groundbreaking Virtual Asset Service Provider’s Bill, widely referred to as the Crypto Bill. The decision to entrust BAK with this pivotal responsibility comes on the heels of their second appearance before the National Assembly Committee on Finance and National Planning, which convened on October 31.

It is worth noting that BAK’s initial interaction with the committee took place in August 2023, during which they vocally opposed the Digital Asset Tax (DAT) provision contained within Kenya’s Finance Act for 2023.

The move by parliament to delegate the drafting of the cryptocurrency legislation aligns with the backdrop of significant cryptocurrency activity within the nation, with transactions soaring to nearly $20 billion (equivalent to KES 3 trillion) between July 2021 and June 2022.

The surge in cryptocurrency engagement places Kenya in a prominent position, ranking third in Africa for crypto site traffic and 21st globally for crypto adoption.

The high-stakes meeting between BAK and the National Assembly Committee primarily sought to foster a collaborative partnership between the Blockchain Association and the national government in shaping comprehensive regulations for cryptocurrencies and digital assets.

During this session, BAK joined forces with notable industry players, including Binance, Yellow Card, Kotani Pay, and the Law Society of Kenya (LSK), to present essential components of a robust regulatory framework.

These components encompassed a clearly defined licensing structure, a taxation framework, measures for consumer protection, anti-money laundering (AML) and counter-terrorism financing protocols, and the establishment of a regulatory sandbox.

In response to the collective proposals, the parliamentary committee issued a directive instructing BAK to prepare and submit a comprehensive bill governing digital assets within a tight two-month timeframe.

This unprecedented development highlights a previously recognized knowledge gap that has impeded the authorities’ ability to effectively regulate this evolving asset class.

Furthermore, it signifies a unique instance in which a parliamentary committee has mandated an association to draft legislation for future adoption.

The directive assigned to BAK, entrusting them with the responsibility of formulating Kenya’s regulatory framework for digital assets, including taxation integration and revenue guidelines, reflects a growing trend in several African nations.

South Africa, Nigeria, and Mauritius have all taken strides in regulating digital assets, setting precedents in the African cryptocurrency market with values reaching $25 billion, $19 billion, and $3 billion, respectively.

These regulatory efforts have materialized through mechanisms such as the Financial Sector Conduct Authority in South Africa, the Finance Act of 2023 and SEC Regulations on Digital Assets in Nigeria, and the Virtual Asset and Initial Token Offering Services Act of 2021 in Mauritius.

This development underscores the growing prominence of Africa in the global cryptocurrency landscape.