Kenya ranks 21st out of 155 countries in global cryptocurrency usage, with over 730,000 users, most of whom are under 40. This growing adoption has caught the attention of the International Monetary Fund (IMF), which is urging the country to establish a transparent regulatory framework for digital assets.
According to an IMF technical assistance report released on January 8, 2025, the lack of clear regulations poses potential risks to financial stability, consumer protection, and market integrity.
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The IMF highlighted that, despite the Central Bank of Kenya (CBK) prohibiting banks from engaging with cryptocurrency entities, cryptocurrencies, particularly stablecoins like USDT, have gained popularity in Kenya. Businesses are increasingly using these digital assets for international payments, especially during periods of dollar scarcity and the depreciation of the Kenyan shilling.
A survey conducted by a technical working group, including representatives from the CBK and the Capital Markets Authority (CMA), revealed a wider use of cryptocurrency than previously estimated. The survey also emphasised the need for enhanced financial literacy to protect consumers as cryptocurrency adoption expands.
Crypto’s economic influence in Kenya
Kenya’s cryptocurrency sector has become increasingly significant. In 2022, the Kenya Revenue Authority collected Sh10 billion in taxes from cryptocurrency transactions. The sector transacted an estimated Sh42.4 trillion between 2021 and 2022, contributing to approximately 20 percent of the country’s GDP.
Digital assets are widely used by both corporate and individual users as a hedge against shilling depreciation and foreign settlements, even though individuals usually invest less than Sh100,000.
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Stablecoins: A growing trend in Kenya’s crypto market
Stablecoins, in particular, have become a popular choice for transactions due to their stability. Unlike more volatile cryptocurrencies like Bitcoin and Ethereum, stablecoins are linked to reserve assets such as the U.S. dollar or gold, making them a reliable medium of exchange in regions with unstable currencies.
In response to the growing crypto market, Kenya has proposed a National Policy on Virtual Assets and Virtual Asset Service Providers. The policy, which is currently open for public comment until January 24, 2025, seeks to balance the need for innovation with concerns over financial stability and consumer safety. Kenya is expected to finalise and implement this regulatory framework by April 2025.
The IMF has backed these regulatory efforts, which aim to promote innovation, ensure consumer protection, and mitigate risks in the crypto market. If successful, Kenya could serve as a model for other African nations grappling with how to regulate the rapidly expanding digital asset sector while maintaining financial stability.