Kenya is starting to regulate cryptocurrencies (or virtual assets) and the businesses that handle them, known as Virtual Asset Service Providers.
They’re doing this by setting up a team of different agencies, including the Central Bank. This news was reported on Monday by local outlet NTV Kenya.
Kenya forms team to tackle crypto risks
The head of Kenya’s National Treasury, Prof. Njuguna Ndung’u, announced the creation of a multi-agency team at the National Assembly meeting.
The team’s formation comes after regulators voiced concerns about unregulated digital assets and potential risks like money laundering and financing of terrorism, as identified by the Central Bank.
Kenya is setting up a team to regulate cryptocurrency, following a recommendation from ESAAMLG.
The move comes as there is a rise in crypto activity in the country, with Kenya ranking third in Africa for crypto purchases in 2022.
— Moe (@moneyacademyKE) April 23, 2024
This evaluation emphasized the likelihood of misuse of virtual assets for money laundering and terrorism financing, thus necessitating regulatory measures. Kenya’s 2022 report on money laundering prevention highlighted the need to monitor virtual assets and their service providers closely.
Officials in Kenya discovered that during 2023, around $20m entered the economy through questionable M-Pesa withdrawals. These were connected to the currently halted Worldcoin iris-scanning project.
Kenya’s growing cryptocurrency interest
Kenya has the most interest and activity in cryptocurrency in East Africa, and it’s one of the top five countries in Africa. However, it’s second to Nigeria in the total number of people who own cryptocurrency, with about 4.4 million holders.
Kenya is changing its stance on cryptocurrency regulation. After a period of resistance, the nation’s parliament started having more discussions and planning projects related to crypto in 2023.
The Capital Markets (Amendment) Bill, 2023, was given the green light by the National Assembly’s committee in December. If this bill gets approved, it will significantly shift how Kenya handles cryptocurrency. It will introduce taxes on crypto exchanges and wallets, making them operate like traditional banks.
Bitcoin mining from a former volcano site
In other news, a startup called Gridless operates a small-scale Bitcoin mining venture out of a former volcano site near Kenya’s Hell’s Gate National Park. Subsidized by Jack Dorsey’s Block, Gridless employs renewable energy sources to power six mines in Kenya, Malawi, and Zambia. Their goal is to contribute to the worldwide decentralization of the Bitcoin network.
Gridless CEO Erik Hersman emphasizes the importance of the company’s contribution, saying, “That doesn’t happen without the bitcoin miners and us being globally distributed.” Bitcoin’s decentralization ensures no entity controls the network, thus remaining secure against potential shutdowns.
Bitcoin mining is a risky venture primarily based on the cryptocurrency’s market value, which fluctuates significantly. Bitcoin’s recent history has included a 60% value drop and a record high of $73,000 within a few months. Regardless, miners have remained resilient in supporting the network.
An April 18 Deutsche Bank report noted that crypto miners are expected to gravitate towards regions with lower energy costs due to profit margin reduction. Regions like Africa and the Middle East are becoming increasingly attractive for miners seeking affordable energy solutions.
At the center of this mining venture is Hersman, who was born and raised in Kenya and Sudan. He, along with Philip Walton and Janet Maingi, spent time building internet infrastructure in Africa before delving into the world of bitcoin mining.
In early 2022, the team started exploring innovative ways to bridge the gap between power production and availability, particularly in Africa, where nearly 43% of the population, roughly 600 million people, do not have electricity. They came up with the idea of bitcoin mining as a possible solution.
This approach could greatly assist renewable energy developers by distributing unused power across the continent. Gridless has grown to eight full-time staff members and mainly manages its operations remotely through its software.
The Hell’s Gate area is a vast, winding canyon home to wildlife like cheetahs, zebras, and giraffes. It’s a spectacular sight, surrounded by cliffs, volcanoes, and dense vegetation. Periodically, steam bursts up from the ground, a sign of the nearby volcanic craters.
These craters erupted in the 19th century, devastating the local Maasai tribe and posing a threat to other settlers.
The time when volcanoes were just a source of disasters is over. Today, they’ve been turned into complicated networks of pipes for geothermal power stations.