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The International Monetary Fund (IMF) has advised Kenya to establish a comprehensive regulatory framework for cryptocurrencies that aligns with global standards to protect consumers and tackle risks like money laundering and terrorism financing.

This guidance comes from a technical assistance report released on January 8, following a request from Kenya's Capital Markets Authority (CMA).

Kenya's current regulatory environment is outdated and inadequately addresses the complexities of the cryptocurrency market, leading to a rise in crypto-related scams and criminal activities, as noted in the IMF's analysis. The lack of consensus among Kenyan legislators on crypto regulation has been a significant issue highlighted during IMF consultations in Nairobi.

The IMF recommends Kenya should:

• Adopt international regulatory standards like the Bali Fintech Agenda, FATF Recommendations, and the FSB Global Regulatory Framework for Crypto-Asset Activities to create a transparent and clear regulatory environment.

Short-term Recommendations (6–12 months):

• Perform detailed empirical studies to grasp the crypto market dynamics better.
• Improve inter-agency collaboration and education.
• Clarify the scope of existing regulatory measures.

Medium to Long-term Recommendations:

• Develop a thorough legal and licensing structure for crypto assets.
• Boost supervisory capabilities.
• Align Kenya's regulatory practices with global best practices.

The IMF also suggests moving beyond basic surveys for market analysis, advocating for in-depth assessments and clear legal definitions of crypto assets to prevent legal inconsistencies.

It stresses the need for cooperation with international regulators to manage risks from global crypto exchanges within Kenya, enhancing enforcement and reducing vulnerabilities in this fast-paced market.

This push for regulatory reform reflects Kenya's increasing prominence in the crypto world, aiming to leverage the benefits of blockchain technology while ensuring financial stability and consumer protection. By adopting these recommendations, Kenya can potentially lead in crypto innovation while safeguarding its financial ecosystem.

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