How do I start cryptocurrency mining in Kenya?

Technologies in Sub-Saharan Africa, Kenya stands amongst other giants like South Africa and Nigeria. The country has consistently continued to develop various innovative products globally to enhance financial inclusion, with the greatest being M-Pesa (M for mobile, Pesa for money in Swahili). This is a mobile phone-based money transfer, payments and micro-financing service, which remains one of the most innovative products globally.

Additionally, Kenya is the leading African country amongst 10 countries globally in terms of cryptocurrency holdings and blockchain-related transactions. As of January 2018, Kenya’s Bitcoin holding represented over 2% of the country’s Gross Domestic Product (GDP), a substantial percentage given that 10 countries have a comparable level of GDP invested in cryptocurrencies.

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Market excitement in cryptocurrencies has shifted to a debate on regulatory risk, given the borderless nature of transactions, the limited nature of supply, fears about the long-term value of fiat currencies in an era of quantitative easing, and the allure of anonymity in conducting virtual currency transactions, among others. This volatility in price fluctuation remains a concern, even as regulators seek to strike a balance between managing the risks that accompany innovations and avoiding being an impediment to market-led innovation. The debate is on as to the ideal regulatory perimeter within which these virtual currencies that use decentralised technology operate.

Government attitude and definition

The Government of Kenya is neither receptive to cryptocurrencies nor does it prohibit them. In December 2015, the Central Bank of Kenya (CBK), through its Governor, issued the following statement to the public: “This is to inform the public 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 public should therefore desist from transacting in Bitcoin and similar products.”

In quick succession, the CBK issued another warning to financial institutions, cautioning them from dealing with virtual currencies or transacting with institutions that engage and/or deal with virtual currencies.

The Capital Markets Authority (CMA) issued a cautionary notice on 21 February 2018 warning investors against taking part in Initial Coin Offerings (ICOs), indicating that the CMA had not approved any ICOs and that the offerings were unregulated and speculative investments with considerable risk exposure to the investor. This was issued against the backdrop of Wiseman Talent Ventures Limited, which sought to raise money from the public through issuance of digital tokens in the form of coins and further providing a platform for the trading of said coins on its coin exchange, styled as (Hyperlink) The CMA opined that KeniCoin’s value was being marketed as exponentially rising since its initial offering posing substantive information asymmetry, liquidity and fraud risks.

Whilst appreciating the necessity of Kenya to be on par with other nations in emerging technologies, in 2018, the Government constituted the Distributed Ledger Technology and Artificial Intelligence Task Force to develop a roadmap for emerging technologies that will define the evolving Fourth Industrial Revolution. In its report, several recommendations were advanced; however, of particular interest were the following:

• the recommendation by the team for a digital sovereign cryptocurrency by the Government that is accessible and can be tradable globally in line with the G20 Summit recommendation on the need for digital currencies to further enable global financial inclusion;
• creating a Fintech legal and regulatory sandbox; and
• implementing blockchain technology in various sectors within the Public Service, e.g. land titling, elections, etc.

Without prejudice to the foregoing, the CBK seems to be exhibiting a relaxed approach: during an online interview with the US media, on the sidelines of Georgetown D.C.’s Fintech week held in October 2020, the Governor stated that the country was having discussions with other global players, in various ways, around the introduction of Central Bank digital currencies. This has been catapulted by the burgeoning of private cryptocurrencies and the CBK feeling left out of the space.

In summation, cryptocurrencies are currently not regulated in Kenya, nor are they backed by the Government or the CBK, and therefore are not recognised. However, recent developments seem to indicate that cryptocurrencies might be treated as securities and not as currencies.

Cryptocurrency regulation

Various reasons have been fronted for the regulation of crypto assets, including, inter alia, that they pose a significant risk to global security due to their anonymous nature that enables users to circumvent disclosure requirements, e.g. know-your-client (KYC) and anti-money laundering (AML), imposed on financial transactions to counter money laundering and terrorism financing. Secondly, the global regulation of the crypto economy has fragmented and stagnated as formal regulatory approaches oscillate between recognition and rejection of crypto assets. Moreover, the decentralised nature of crypto assets renders it difficult for any Government to claim exclusive territorial jurisdiction to regulate the crypto economy. Attempts to focus on the source nationality of crypto assets are undermined by the geographical mobility of the assets. Lastly, crypto assets pose a threat to the stability and resilience of the global financial superstructure established by international financial institutions, as cryptocurrencies are increasingly substituting fiat currency.

It is against this background that the drafting of Kenyan regulation tends to be broad and inclusive as opposed to narrow and focused, which has had the effect of creating licensing and regulatory categories in which most financial technological innovations like cryptocurrencies can qualify.

Regulators in Kenya, specifically the CBK and the CMA, have generally demonstrated an active approach to regulation. They tend to interpret their powers and responsibilities as widely as possible and have demonstrated a willingness to include new innovations under their regulatory purview.

In Kenya, there are no specific cryptocurrency laws and the general regime of the law applies. Fintechs are regulated dependent on the nature of the innovation. They are regulated primarily under the following laws:

The National Payments Systems (NPS) Act administered by the CBK

The NPS Act provides for the regulation and supervision of payment systems and payment service providers and for connected purposes. It brings all payment service providers, including mobile phone service providers, into a single regulatory framework, and provides the CBK with direct oversight over them and their products to ensure the safety and efficiency of their respective platform. Currently there are three telecommunications companies in Kenya that offer mobile payment services, i.e. Safaricom, Airtel, and Telkom, which are licensed as payment service providers under the NPS Act.