The government formed a working group to draft crypto rules because of concerns that Kenya lacks a framework for regulating the cryptocurrency industry. The nation's authorities in East Africa are optimistic that the legislation that have been passed will name a single regulatory agency to supervise the cryptocurrency sector.

Kenyan Financial System Is Threatened by Lack of Regulation

A working group tasked with creating cryptocurrency rules was established by the government because of fear that Kenya will be added to the Financial Action Task Force's (FATF) red list. According to a Business Daily report, this working group is supposed to submit its draft to the Kenyan Cabinet after it is finished.

The country of East Africa expects that the legislation that have been passed will name the regulatory body in charge of regulating the bitcoin market. Stakeholders in Kenya's cryptocurrency industry would be informed of the necessary actions if the government accepts the draft, according to Financial Reporting Centre (FRC) Director-General Saitoti Maika.

Maika emphasized that the cryptocurrency sector has to be regulated, saying: It's likely that we'll have a separate regulator for virtual assets. It is not possible for us to live in denial. We run a greater chance of punishment the less we follow the rules.

Kenya, which has one of the most active cryptocurrency markets on the continent, has, like many other African nations, demonstrated a reluctance to implement legislation specifically pertaining to cryptocurrencies. Due to the current situation, Kenya has a better chance of being included to the FATF's grey list along with four other East African Community (EAC) members.

That being said, Kenyan authorities may be able to punish people who use digital assets like bitcoin (BTC) to launder money if a legislative framework is put in place to regulate the country's digital asset market. Additionally, authorities would have access to information about the movement of funds from the cryptocurrency realm into Kenya's financial system thanks to such a legal structure.