Kenya has been one of the most prominent countries in Africa in embracing the emergence of virtual currency. The banks of Kenya tried to discourage the cryptocurrency surge by warning the people about the high volatility in the crypto market. The number of transactions using bitcoin has escalated over the last few years. The Kenyan Government has still not recognized the digital currency market officially.
It took a very short time for Kenyan people to understand how beneficial bitcoin could be for their businesses, as earning through bitcoin trading has also been much easier and simple due to crypto trading platforms like Bitcoin fortress. The citizens of Kenya also realized the advantages virtual currency has over banks, and surely it was a threat to native currency if banks did not intervene to control the spread.
Central Bank response
Business in Kenya was in favour of bitcoin implementation and wanted the Government to allow the use of cryptocurrencies. The Central Bank of Kenya restricted other banks to deal in cryptocurrencies which acted as a big hurdle in the way of crypto acceptance. Many businesses claim that they were actually getting benefits from the bitcoin by securing their payments in the form of bitcoins, plus they were one step forward to accept technological changes.
The role of banks in discouraging the bitcoin emergence was quite visible, as they were restricted to welcome those who have any direct association with digital currency. For example, if a business receives bitcoin as payment from their customers, it would not be easily possible to convert bitcoin into banknotes.
The pace at which cryptocurrency was gaining popularity in Kenya was phenomenal, but the state was worried about the long-term effect of virtual currency on the economy. It can be concluded that banking systems are not ready yet to embrace the cryptocurrency infrastructure.
Why Strict Regulation?
The Government was concerned about the safety issues regarding virtual currency. It is quite clear to almost every crypto user that, it is not completely secure to deal in bitcoin. The previous cases regarding hacking and thefts have been reported by several individuals and institutes.
Many crypto platform service providers went bankrupt which caused quite a number of people to lose their money. The same is the case with wallet providers, although things have changed over time and technological advancement has reduced the impact of such activities.
As the Central Bank of Kenya was quite straightforward in making the citizen realize the vulnerable effects bitcoin could have. The high volatile nature of bitcoin was a great matter of concern for the State, as there are moments when the price is high up, and right within a small span of time, the price falls. The government did not want people to lose their money in the crypto-market.
The Kenyan government has always been one step forward in embracing technological advancement. The ease of payment was a great improvement in the online payment system. Those who were tired with the traditional banking system were even more willing to welcome bitcoin. The government realized this change and took necessary steps to keep the financial structure balanced
Cryptocurrency regulation in Kenya
The authorities have found the cryptocurrency decentralized nature as a threat.
As crypto transactions do not reveal the identity of users, this factor is manipulated by corrupt people to fund terrorist organizations and money laundering. Plus the government found it difficult to implement territorial jurisdiction due to the decentralized nature of the cryptosystem.
There has been no change regarding the crypto recognition matter, the decision of cryptocurrency acceptance and legalization is still pending. The virtual currencies are still not regulated in Kenya. Furthermore, the government also pointed out the stability issue of the virtual currency, as cryptocurrency is on its run to substitute fiat-currency. The Central Bank of Kenya is among one of the two regulators in Kenya and efforts to control and regulate the digital currency system have been under demonstration.
There are no set of specific laws regarding cryptocurrency regulation yet, although the work is in progress, and in the future government might end up with the proper infrastructure to accommodate the virtual currency systems.