In a significant move, the Thirteenth Parliament of the Republic of Kenya, during its second session, deliberated on Motion 036/2023, focusing on the establishment of a regulatory framework for cryptocurrency.
The motion, proposed by The Hon. Irene Mayaka, M.P., raises concerns about the growing use of cryptocurrency in Kenya and emphasizes the need for a regulatory structure to address potential risks and ensure responsible governance.
Background
The motion begins by acknowledging the constitutional mandate bestowed upon the Central Bank of Kenya (CBK) under Article 231(2) to formulate monetary policy, promote price stability, and issue currency, among other functions.
It highlights the provision in the National Payments Systems Act, which empowers the CBK to designate payment instruments through Gazette notices. This power is exercised when the bank believes an instrument is widely used and may impact Kenya’s payment systems, or when necessary to protect public interests and the integrity of the payment instrument.
Cryptocurrency Landscape in Kenya
The motion recognizes the growing significance of cryptocurrencies in the modern financial ecosystem, with Kenya emerging as one of the leading countries in cryptocurrency ownership in Africa. While acknowledging the potential benefits of cryptocurrencies, the motion expresses concerns about their unregulated use, which could lead to financial instability, market manipulation, and potential illegal financial activities.
There is also a fear that unregulated cryptocurrencies may unofficially replace and devalue the domestic currency.
Tax Implications
The Finance Act of 2023 has already taken a step towards regulating the cryptocurrency space by introducing taxes on income derived from the transfer or exchange of digital assets, which includes cryptocurrencies. This taxation is seen as a first step in recognizing and controlling the digital economy.
Proposed Regulatory Framework
The motion calls for urgent action by the National Government, specifically through the National Treasury & Economic Planning, to develop a comprehensive regulatory framework. This framework would address key aspects such as mandatory registration of cryptocurrencies and digital wallets, licensing requirements, and governance standards for businesses operating in the cryptocurrency space.
Conclusion
As Kenya embraces the digital age and witnesses a surge in cryptocurrency use, it becomes imperative for the government to strike a balance between fostering innovation and protecting the financial stability and interests of its citizens.
Motion 036/2023 represents a crucial step towards establishing a regulatory framework that ensures responsible cryptocurrency usage, prevents potential risks, and fosters a secure and thriving digital economy. The deliberations on this motion will shape the future of cryptocurrency in Kenya and set a precedent for other nations grappling with similar challenges in the evolving landscape of digital finance.
