The IMF report now reveals that Kenyan firms are swiftly adopting the use of crypto-currencies, particularly stablecoins like USDT, for foreign supplier payments during periods of dollar shortages and shilling depreciation.
This finding follows a market survey done by a technical working group comprising officials from the Capital Markets Authority (CMA) and Central Bank of Kenya (CBK). The survey revealed that, numerous Kenyan firms are extensively turning to usage of digital assets than previously thought, despite the CBK’s prohibition on banks doing business with crypto entities.
This survey places Kenya at 21 rank out of 155 countries in global crypto adoption, with over 730,000 users, predominantly under 40 years old, investing in Bitcoin, Ethereum, and USDT.
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Kenya Revenue Authority’s successful ollection of Sh10 billion in taxes from crypto users last year, has improved the sector’s significantly as the findings of the report stated. This enabled the market to transact about Sh42.4 trillion between 2021 and 2022, representing nearly 20% of GDP.
While individuals typically invest less than Sh100,000, both corporate and individual users primarily employ digital assets asa hedge against shilling depreciation and for international settlements.
Stablecoins are tied to a reserve asset like the US dollar or gold to sustain value. In areas or places where traditional currencies are unstable, stablecoins
strive to provide a more trustworthy medium of exchange than volatile cryptocurrencies like Bitcoin and Ethereum. Tether, a stablecoin, is tied to the US dollar, so 1 USDT is worth 1 USD. Stablecoins are tempting for daily transactions, international payments, and currency depreciation hedges due to
their stability.
While innovative, their emergence
requires strict regulatory control to ensure financial stability. Kenya’s draft National Policy on Virtual Assets and Virtual Asset Service Providers, available for public
comment until January 24, 2025, indicates a practical transition towards adopting digital innovation while tackling essential issues related to consumer protection and financial stability.
This regulatory development may establish Kenya as a model for other African countries addressing the intricate convergence of traditional finance and digital assets.