Kenya will look to introduce a regulatory framework for cryptocurrencies, this is according to Dr Patrick Njoroge, Governor of the Central Bank of Kenya (CBK).
“Any crypto or all the other cryptos has to follow the same sort of test which is you know what is it that is solving. And then let’s create a sort of a framework that works for us for regulation” said Dr Patrick Njoroge while speaking to Bloomberg from the floor of the New York Stock Exchange on Wednesday.
Cryptocurrency adoption in Kenya has grown significantly and the country has the highest proportion of crypto-owning inhabitants than any other country in Africa according to a policy brief by UNCTAD which shows that Kenya’s crypto ownership as a share of the population stands at 8.5%, the fifth-highest globally.
How CBK Will Approach Crypto Regulation
According to the Governor of Kenya’s Central Bank, the crypto sector will need to be well regulated so as to avoid a wild west case scenario like the case of mobile digital lenders.
“We need to appreciate that innovation is not innovation for innovation sake. Those that are actually promoting them (crypto) may have wanted innovation for innovation sake. But our question is this a society that’s the fastest that notwithstanding whatever happens needs to also be well regulated. We’ve made the point that we do not want a Wild West scenario out there. And indeed we did have a Wild West scenario with the digital credit providers.” said Dr Patrick Njoroge.
The Central bank of Kenya (CBK) in September 2022 began the process of issuing operating license to mobile lenders to carry out lending business in Kenya. In a statement Monday, September 19, 2022 – the CBK said it received 288 applicants since March this year out of which, only ten were granted the licence. This follows the September 17, 2022 deadline that had been set by the regulator after new regulations under Central Bank of Kenya DCP, Regulations 2022, came into force on March 18, 2022 to provide for the licensing, governance and credit operations of mobile lenders.
He said that regulation of crypto would follow the same process the Central bank adopted to regulate mobile digital credit providers.
“Regulation should not be sort of the enemy of innovation. On the contrary I think they work hand-in-hand… So we we are not in the business of inhibiting innovations. But what we need to do is to be sure that the framework around it is appropriate for our society.” Patrick Njoroge.
The Governor believes that cryptos are less of a currency but more of a highly speculative investment asset class but they still need to be regulated.
“The point is like all asset classes one needs to regulate it in some way to make sure that this is something that not only makes sense but whoever is involved in it it doesn’t bring in the other evils that or let’s say the other negatives that actually could very easily go up in the door to if not if left unchecked.”
In February this year, the Central bank of Kenya (CBK) published a discussion paper on its Central Bank Digital Currency (CBDC), while seeking public comments on the potential benefits and risks, and related policy considerations, of introducing a CBDC in Kenya.