Kenyan MPs have given the Treasury secretary a two-week deadline by which he must decide the fate of bitcoin and other cryptocurrencies, specifically regarding their status as legal tender in the nation of 48 million people. The deadline follows a warning issued in April by the Central Bank of Kenya (CBK).
The Finance and National Planning Committee asked agency officials to explain the popularity of cryptocurrency trading in Kenya, as well as why the Treasury and the CBK were permitting the unregulated currencies to be traded and invested in with no licensing procedure or capital gains tax being required, echoing the familiar situation being seen in nations around the world as government regulators start to finally take notice of the surge in crypto trading.
The committee chairman, Joseph Limo, laid out the situation in no uncertain terms.
“We are surprised to hear that even the CBK is not aware that there is a lounge at Kenyatta University, an ATM in town, and a hotel in Nyeri which trade in bitcoins. There is a bigger problem in Kenya since people are trading billions in virtual space yet the Treasury has not licensed and taxed it like trade in M-Pesa and bank transactions.”
The CBK did issue a notice to the public in December 2015 warning the public about the use of digital currencies, stating in the document that “virtual currencies such as Bitcoin are not legal tender in Kenya and therefore no protection exists in the event that the platform that exchanges or holds the virtual currency fails or goes out of business.” The notice goes on to list other risks associated with cryptocurrencies.
On Tuesday, Henry Rotich, head of macroeconomics at Treasury, criticized the volatility of cryptocurrencies by pointing out the dramatic fall in bitcoin’s value seen over the last several months as an example, which perhaps does not bode well for the classification of crypto as legal tender in Kenya.
Mr. Rotich told MPs that like any other developing technology, cryptocurrency is still under review by the government in terms of whether it would be allowed to flourish in the country or be prohibited and regulated, pointing out the potential to facilitate money laundering as one of the primary concerns surrounding the technology.
“I am not aware of people operating locally. But I will endeavour to find out whether we have local exchangers. The issue of cryptocurrencies is evolving and we can take a position as a country. This is a delicate balance between supporting innovation and killing it,” he said.
India recently went through the same process as Kenya is undergoing now, ultimately ruling that bitcoin and other cryptocurrencies were not legal tender.