The Kenyan Parliament has tasked the Blockchain Association of Kenya (BAK) to prepare the initial draft of what could become the Virtual Asset Service Provider's Bill, also known as the Crypto Bill. This historic decision follows BAK's second appearance before the National Assembly Committee on Finance and National Planning on October 31. Previously, BAK had contested the Digital Asset Tax provision within Kenya's Finance Act, 2023, but was unsuccessful.

The objective of the recent parliamentary discussion was to establish a collaborative approach that empowers BAK to work with the national government in shaping favorable policies for the regulation of cryptocurrencies and digital assets.

The Kenyan government is actively pursuing regulations to encourage innovation and has engaged private stakeholders like BAK. As part of this effort, the Parliamentary Ad Hoc Committee recently concluded the World Coin hearings, resulting in detailed reports and recommendations. Notably, the committee instructed parliament to prepare a regulatory framework for virtual asset service providers within the next six months, and BAK is playing a leading role in its development.

Kenya is currently home to over 4 million cryptocurrency users and ranks as the fifth-fastest growing crypto market in 2022. During the parliamentary session, BAK, together with industry leaders like Binance, Yellow Card, Kotani Pay, and the Law Society of Kenya, delivered a comprehensive presentation to the Committee. They highlighted key elements crucial for a robust regulatory framework, including a clear licensing framework, tax framework, consumer protection framework, anti-money laundering measures, and a regulatory sandbox.

Allan Kakai, the Director of BAK, emphasized Kenya's aspiration to become Africa's Digital Assets Hub by implementing a well-defined licensing and regulatory framework. “We have been handed the tools to create Africa's Digital Assets Hub and turn Kenya into a Crypto Savannah. A hub where DeFi, web 3.0, and blockchain innovation come to thrive," Kakai said.

In response to this presentation, the parliamentary committee directed BAK to draft and submit a digital assets bill within a two-month timeframe. This move demonstrates recognition by legislators that a knowledge gap has hindered their ability to effectively address this emerging asset class. They now acknowledge that the industry is best equipped to lead in crafting the necessary regulatory framework.

This is the first time a parliamentary committee has directed an association or a stakeholder group to draft a parliamentary bill and bring it to parliament for adoption, Kakai said. “This is very interesting because this has never happened with the Bank Association, this has never happened with the Fintech Association, this has never happened with the Digital Lenders Association, this has never happened with any association at all,” he said.

According to Robert Muoka, CEO of Kenyan prop-tech startup MyShamba Digital, Kenya is drawing inspiration from Switzerland's success story as it embarks on the path to regulate blockchain and crypto assets. Muoka highlights Switzerland's progressive approach to regulation, which has propelled Crypto Valley into a global hub for blockchain innovation, boasting a valuation of over $611.8 billion and housing fourteen Unicorns. “We aim to create a similar environment of trust, clarity, and innovation here in Kenya, positioning our nation as a beacon of opportunity and a catalyst for the digital economy. This marks a giant leap towards Kenya's journey to become a global leader in innovation and digital finance. We are setting the stage for Kenya to shine as a hub for the digital economy, and this journey is filled with boundless opportunities and transformative potential," Mouka said.

Embracing private-public partnerships could help governments develop potent regulatory frameworks that help emerging frameworks thrive in their country. By engaging, the Blockchain Association of Kenya, the government has signalled a commitment to create a thriving innovation ecosystem in the East African country. Kenya's eagerness to derive inspiration from a prosperous ecosystem and customize it to suit local needs has the potential to position them for success and curb capital flight within the digital assets industry.