Kenyan financial regulators have shown a strong sign that trading in bitcoins could soon be legalised, marking a departure from an earlier firm stance against cryptocurrencies.
The Central Bank of Kenya (CBK) and other regulators had initially said they could not guarantee any redress regarding trade in cryptocurrencies, cautioning those using them that they were on their own.
This dampened the enthusiasm of young and tech-savvy Kenyans who had already warmed up to crypto assets. But the new signals by the regulators come as a major boost to the four million Kenyans that own bitcoins.
The regulators now want the National Treasury to come up with an oversight framework on crypto assets activities and players in Kenya.
This was one of the resolutions coming out of a joint forum by the Central Bank of Kenya, Capital Markets Authority, Insurance Regulatory Authority, Retirement Benefits Authority, and the Sacco Societies Regulatory Authority.
“To consider the recommendation of the National Treasury and Economic Planning for the formation of a Technical Working Group of concerned regulators to make recommendations to the Cabinet Secretary on the establishment of a comprehensive oversight framework on crypto assets activities and players in Kenya,” read part of the joint statement.
The recommendation comes at a time when the cryptocurrency market has been dampened by the spectacular collapse of FTX Trading Ltd which formerly operated a cryptocurrency exchange and crypto hedge fund.
The statement went on to say that the recommendations will be followed by “wide consultations and deliberations across the financial sector and other relevant stakeholders.”
This means that financial regulators, especially the CBK, are slowly reconsidering its use in currency transactions.
CBK Governor Dr Patrick Njoroge has for long advised Kenyans against transacting in cryptocurrencies such as bitcoins pointing to their volatility and lack of regulation.
“We have seen this game before in the context of the global financial crisis and the tulip mania,” Dr Njoroge said in 2015, even as he backed blockchain, the technology that underpins bitcoins.
This approach to cryptocurrencies is common among many regulators across the world, who view the unregulated and volatile nature of cryptocurrencies as a big risk for the financial system.