Kenya Proposes Local Offices Requirement for Cryptocurrency Businesses

The Kenyan government has proposed a draft policy requiring cryptocurrency businesses to establish local offices in the country. The legislation exempts companies that offer access to assets confined to closed ecosystems.

Key Provisions of the Draft Policy

Virtual asset service providers (VASPs), including exchanges like Binance and Coinbase, must open physical offices.
VASPs are required to appoint CEOs or directors, subject to approval from regulatory bodies such as the Capital Markets Authority (CMA).
The policy aims to create a comprehensive regulatory framework for consumer protection.
VASPs must obtain licenses from the Central Bank of Kenya (CBK) and CMA to operate.
Licensed entities must comply with anti-money laundering (AML) and counter-financing of terrorism (CFT) measures.
The policy addresses data privacy and cybersecurity, mandating measures to protect users' information.

Kenya has also introduced a 1.5% Digital Assets Tax (DAT) for crypto traders as part of the Finance Act 2023, relying on voluntary compliance due to the lack of specific regulations.

Crypto Adoption in Kenya

Kenya ranks 28th out of 155 countries in the Global Cryptocurrency Adoption Index by Chainalysis.
The rise in digital asset adoption is linked to their use for remittances and alternatives to traditional finance.

Historically cautious towards cryptocurrencies, the government is shifting its approach amid increased underground usage. Compared to other African nations, Kenya is taking proactive steps to regulate digital assets while prioritizing consumer protection.