The Blockchain Association of Kenya (BAK) has two months to make history. The lobby group has until January 2024 to submit to lawmakers a comprehensive draft of what could become a virtual asset service provider bill for the East African country. Sceptics say the time frame, which includes the Christmas and New Year holidays, is hardly enough to involve necessary stakeholders, such as the Central Bank of Kenya (CBK), Kenyan Revenue Authority (KRA), and Capital Markets Authority (CMA). BAK estimates the situation differently. While acknowledging its relatively small team, which comprises 20 lobbyists, five of which are hands-on lawyers, the group maintains it is inching closer to its goal. “Based on our timeline, we have done about 20% of the work that needs to be done before January 2024. We are on track to succeed,” said Allan Sirungai Kakai, who leads legal and policy for the association.

Kakai is basing his progress score on the BAK’s proven ability to assemble a ready team, their progress on an internal report, and the commitment from top crypto firms to sponsor the costs associated with drafting and implementing the bill. Two months may be all BAK has to turn in its draft, but the organisation has drafted a two-year policy plan on the premise that interactions with the government would continue until a virtual asset service provider bill is enacted and adopted. Their plan estimates a presidential assent in Q3, 2024.

“We have representatives from the legal team of some of the biggest crypto firms in Africa. Every day since the announcement, we’ve had stakeholders reach out to support us. The latest is a Singaporean blockchain association that contributed to the regulatory framework that has made Singapore a preferred crypto destination,” Kakai shared in the interview with NODO. The Association of Cryptocurrency Enterprises and Start-ups Singapore, ACCESS, is the entity Kakai is referring. The body works closely with Singapore’s central and commercial banks to craft crypto-forward regulations for the Asian country.

The government will like crypto money

Olaleye Oladimeji, a lawyer and technology consultant who boasts years of experience in policy advisory, spoke to NODO about BAK’s policy drive. If that draft will make headway in parliament, he shared, it must provide a level playing field for stakeholders and reflect benefits for the economy too. “You can sell innovation quite alright, but the government wants to make money and grow the economy in the long run. You must show them how your plans will benefit their economy.”

By Kenya’s law, there’s presently a 3% digital asset tax on exchanging cryptocurrencies, but enforcement remains non-existent. Olaleye believes the government needs to be empowered with tools that allow it to monitor and tax digital assets, hence it can be well-positioned to mitigate exploitation by bad actors. Only profits should be taxed for traders, he suggested, and the BAK should have a provision for this in their draft.

Meanwhile, Kakai and his team seem to understand the government’s needs well enough. Their draft proposes the tokenisation of treasury bills for the Kenyan federal government. “We will demonstrate to the government how tokenisation can offer sustainable alternative revenue for the government,” Kakai said in the chat with NODO.

Treasury bills are government-backed, short-term securities issued by a country’s central bank. Regulated blockchain entities can put treasuries on chain and offer them as virtual assets to retail investors. Usually, this strengthens the exposure of the assets and drives massive buy-ins. According to crypto analytics company rwa.xyz, the value of tokenized US treasury assets that currently exist on public blockchains has grown from around $100 million at the start of 2023 to more than $650 million in August.

Exposure of Kenya’s T-bills to global investors through tokenisation could contribute significantly to the country’s economy and contribute to easing its expanding debt burden. Kenya’s debt condition is putting pressure on its credit profile, according to Fitch, an American credit rating agency.

Global standards, local approach

Kakai told NODO that the draft will be developed using available global standards on crypto regulation, but will be localised to Kenyan realities. To credit his point, he showed how Kenyan lawmakers adapted the European Union’s General Data Protection Regulations (GDPR) to craft Kenyan laws on data privacy.

“One major thing the draft considers is the establishment of a regulatory office with functions that do not overlap the relevant existing bodies. It doesn’t matter if the office is established after the bill is enacted. That happened with the Office of the Data Protection Commissioner, which was established two years after the 2019 act,” Kakai said.

BAK has high hopes for its draft. The short ultimatum by the National Assembly’s Departmental Committee on Finance and National Planning is for this lobby group a moment to prove itself. In September 2022, they lost their fight to repeal the tax on crypto transfers. But 2024 will give them another opportunity, this time to co-work with the government, and show them how exactly an African state should tax a nascent crypto economy.