# The Virtual Assets Bill

An episode of [The Mwango Capital Podcast](https://invisiblenetwork.ai/podcast/1583367792), 27 Sep 2025, 1 h 10 min.

Audio: https://api.substack.com/feed/podcast/174539852/23af944773045c9660ba1f835698cb54.mp3

In this episode recorded on July 23, 2025, and hosted by Julians Amboko, we are joined by Tony Olendo, chair of the Virtual Assets Chamber of Commerce, to unpack Kenya’s new Virtual Asset Service Providers (VASP) Bill. We cover the licensing requirements for virtual asset service providers, legislation, FATF recommendations, regulatory challenges, and initial coin offerings. Subscribe to get notified when we make a new post. Show Notes 00:00:00 Introduction 00:05:04 Understanding Blockchain and Virtual Assets 00:08:13 Regulatory Challenges, FATF Recommendations, and Legislation 00:29:37 Stablecoins and their Role in the Ecosystem 00:35:44 Licensing Requirements for Virtual Asset Service Providers 00:40:36 Capitalization Requirements Debate 00:44:48 Joint Virtual Asset Regulatory Authority 00:49:35 Need for a Kenyan Stablecoin 00:55:03 Raising Awareness on Initial Coin Offerings 01:00:00 Sanctions and Penalties 01:06:35 Data Protection and Repealing Digital Assets Tax 01:09:36 Final Remarks Get full access to The Mwango Weekly at mwangocapital.substack.com/subscribe

## Transcript

[0:00] Ladies and gentlemen,
[0:01] greetings from wherever you're joining this conversation form.
[0:05] SPEAKER_01: My name is Julian Sampovo.
[0:07] I shall be helping navigate this conversation with the eminent
[0:10] Tony Orlando,
[0:11] SPEAKER_01: who's the chairperson of the Virtual Assets Chamber here in Kenya.
[0:14] We want to take a deep dive into the National Assembly Bill
[0:17] number 15 of 2025.
[0:20] SPEAKER_01: It is known as the Virtual Assets Service Providers Bill of 2025,
[0:24] SPEAKER_01: and many of us have reverted to calling it
[0:27] SPEAKER_01: Kenya's click to give.
[0:28] SPEAKER_01: Want to make sense of this.
[0:29] SPEAKER_01: We want to understand why it is critically important.
[0:32] SPEAKER_01: What are the provisions inside of them?
[0:34] SPEAKER_01: What do they mean?
[0:35] SPEAKER_01: Whom do they impact?
[0:36] SPEAKER_01: And why should we take cognizance of these provisions?
[0:40] SPEAKER_01: Just some background on this.
[0:41] SPEAKER_01: It was in February
[0:43] SPEAKER_01: 2024,
[0:44] SPEAKER_01: if I recall,
[0:45] SPEAKER_01: when the plenary of the Financial Action Task Force,
[0:48] SPEAKER_01: but as it's called,
[0:50] SPEAKER_01: placed Kenya on what is called the Grey East.
[0:52] The Grey East basically indicating that there is increased
[0:56] monitoring from the
[0:57] SPEAKER_01: global watchdog on fighters of time and laundering.
[1:00] and terrorism financing and this essentially indicated that we
[1:04] had gaps in our
[1:05] legal architecture around overseeing and being able to net some
[1:09] of these challenges
[1:10] around illicit financial flows one of the requirements there
[1:13] was a whole list of
[1:14] seven and i did a breakdown of this on x you can hop onto my
[1:17] profile and check it
[1:18] out but one of them was a provision for a legal architecture
[1:22] underpinning virtual
[1:24] SPEAKER_01: assets and virtual asset service providers
[1:26] And that is how we have landed with the bill that we are now
[1:30] having a conversation today.
[1:31] SPEAKER_01: And we shall be delving into the conversation of what it entails.
[1:36] Some other background here is that if you read the bill,
[1:39] it is categorized into 10 parts.
[1:41] SPEAKER_01: I won't run for all of them.
[1:42] But part one essentially gives matters including the title and
[1:46] interpretation of
[1:47] SPEAKER_01: some technical terms inside there.
[1:49] SPEAKER_01: Part 2,
[1:50] SPEAKER_01: which is Clause 6 to Clause 8,
[1:51] SPEAKER_01: then gives up provisions for the designation of regulatory authorities.
[1:54] SPEAKER_01: And this is very critical.
[1:56] That is where the Capitalist Authority comes in,
[1:58] the Central Bank of Kenya,
[1:59] and a few others.
[2:00] SPEAKER_01: If you go to Part 3,
[2:02] then it focuses on the licensing regime for virtual asset
[2:05] service providers.
[2:06] SPEAKER_01: If not only you can find between Clause 9 and Clause 18.
[2:09] Part 4 of the bill provides for general obligations of persons
[2:13] licensed as virtual
[2:15] SPEAKER_01: asset service providers.
[2:17] SPEAKER_01: in the jurisdiction that is Kenya.
[2:19] SPEAKER_01: And to close this part,
[2:20] SPEAKER_01: I'll just touch on part five,
[2:22] SPEAKER_01: which if I checked my notes well,
[2:24] SPEAKER_01: that again gives the provisions for prevention of money laundering,
[2:27] SPEAKER_01: terrorism financing,
[2:28] and the proliferation or the financing of virtual assets that
[2:31] are provided.
[2:32] SPEAKER_01: We shall endeavor to make an exhaustive case across all these spurts,
[2:36] SPEAKER_01: but we shall be,
[2:37] SPEAKER_01: of course,
[2:37] SPEAKER_01: constrained by time.
[2:38] SPEAKER_01: And that is why I want to go to that conversation immediately.
[2:41] My guest is the chair of Assonative Bastion of Assets Chamber
[2:45] here in Kenya,
[2:45] Mr.
[2:46] Tony Orlando.
[2:47] Tony,
[2:47] please tell us who you are,
[2:49] what you do,
[2:50] and how you are getting into this space.
[2:52] SPEAKER_01: Hi, everyone.
[2:53] SPEAKER_02: My name is Tony Orlando.
[2:54] SPEAKER_02: I've been a software developer for about 15 years.
[2:57] SPEAKER_02: I have been involved in virtual assets since 2017.
[3:00] I had my first startup in the area where we're looking at
[3:03] cross-border payments.
[3:05] I think my origin story starts with when I moved to Trinidad
[3:09] from Kenya after I got
[3:10] SPEAKER_02: married and I needed to move money back home.
[3:13] And there was no simple way for you to move money from a global
[3:16] South country to
[3:17] SPEAKER_02: another global South country.
[3:19] And that became the point at which I began considering there
[3:22] has to be a better way
[3:23] for us to be able to organize finance enough to be able to
[3:26] transmit essentially
[3:28] SPEAKER_02: value across the internet.
[3:30] If you're looking at the landscape that we are living in today
[3:33] is I can send a
[3:34] SPEAKER_02: message to anybody across the world in seconds,
[3:37] SPEAKER_02: but I can't send money.
[3:39] SPEAKER_02: And because of that kind of limitation,
[3:40] that's what got me into looking at the blockchain ecosystem and
[3:44] ways that we could
[3:44] SPEAKER_02: power brand new levels of cross-border payments.
[3:48] SPEAKER_02: And as I got into it more and more,
[3:50] SPEAKER_02: I realized there's more we could do beyond just cross-border payments.
[3:53] SPEAKER_02: And that's how I ended up working and building my current startup,
[3:57] SPEAKER_02: which is building in tokenized money market funds,
[4:00] SPEAKER_02: stable coins,
[4:01] SPEAKER_02: and FX protocols as well.
[4:03] My work with the Virtual Asset Chamber of Commerce would have
[4:06] begun at the end of
[4:07] SPEAKER_02: last year,
[4:08] SPEAKER_02: where
[4:09] I would have approached the chamber to help me navigate the
[4:12] legal and regulatory
[4:13] SPEAKER_02: landscape inside of the Kenyan ecosystem specifically.
[4:16] SPEAKER_02: And the more I engaged with them,
[4:18] SPEAKER_02: the more I saw,
[4:18] SPEAKER_02: you know,
[4:18] there's more we could actually do and there's things that we
[4:21] could actually enact,
[4:22] SPEAKER_02: right?
[4:23] SPEAKER_02: Part of the reality was we needed to have an outfit.
[4:26] that was able to engage in Bework in a way that was impactful,
[4:31] but mostly founder-led.
[4:33] SPEAKER_02: And I think February of this year,
[4:35] SPEAKER_02: I became chairman of the Virtual Asset Chamber of Commerce,
[4:37] SPEAKER_02: and the rest,
[4:38] SPEAKER_02: as I say,
[4:38] SPEAKER_02: is history.
[4:39] SPEAKER_02: We're a policy think tank,
[4:41] SPEAKER_02: and we advise governments,
[4:43] SPEAKER_02: legislators,
[4:43] SPEAKER_01: and regulators on sound crypto regulation.
[4:47] That timing could not have been a lot more spot on because in
[4:49] February is when we
[4:50] SPEAKER_01: were having this bill running parallel with the finance bill.
[4:54] SPEAKER_01: Maybe some of it because it was running parallel with the finance bill,
[4:57] SPEAKER_01: it ended up being a bit obscured.
[4:58] But this is a very critical deal and that's why we are having
[5:01] this conversation.
[5:01] SPEAKER_01: And many thanks to Mobile Capital for convening all of us here.
[5:04] SPEAKER_01: What are virtual assets?
[5:05] SPEAKER_01: What is blockchain?
[5:07] Why are we having this conversation around the legislative
[5:09] framework at this time?
[5:11] So a blockchain is essentially a shared database that we both,
[5:15] all of us own.
[5:16] SPEAKER_02: So I usually use the example of a charmer.
[5:18] So let's say you and I and everybody on this call has a charmer
[5:22] and we choose to
[5:22] SPEAKER_02: appoint Charles Jugona,
[5:24] SPEAKER_02: where he's an old friend at the treasurer.
[5:27] And we say Charles is now the treasurer and he holds the ledger
[5:31] or the copy of all
[5:31] SPEAKER_02: of the deposits and all of the withdrawals,
[5:34] SPEAKER_02: all of the payouts.
[5:35] SPEAKER_02: So we then entrust Charles with it.
[5:37] SPEAKER_02: And then after a while, Charles has financial trouble.
[5:40] SPEAKER_02: But on the book he recorded,
[5:42] we don't really collect the fact that you actually need the
[5:44] physical contributions
[5:45] SPEAKER_02: here a week or two later.
[5:47] SPEAKER_02: So we all decide to keep a copy of this ledger.
[5:49] SPEAKER_02: Charles still remains a treasurer, but all of us now share this ledger.
[5:53] SPEAKER_02: And whenever a transaction is made,
[5:55] SPEAKER_02: you communicate to everybody in the group and everybody writes it down.
[5:58] SPEAKER_02: And everybody has a record of that.
[6:00] SPEAKER_02: That essentially forms the basis of how our blockchain works,
[6:03] SPEAKER_02: where we have this shared distributed measure that we all agree on.
[6:07] SPEAKER_02: It's updating all the balances.
[6:10] SPEAKER_02: Whenever there's a deposit or there's a withdrawal,
[6:12] SPEAKER_02: we communicate it inside this particular network.
[6:14] And everybody who holds that holds a record of exactly what has
[6:18] transpired inside
[6:19] SPEAKER_02: of this chamber that we have.
[6:21] SPEAKER_02: And so when we're looking at that particular design,
[6:25] SPEAKER_02: have a book,
[6:25] SPEAKER_02: but the book could contain a record of land transfers.
[6:28] SPEAKER_02: It could contain a record of a supply chain.
[6:31] SPEAKER_02: So let's say I am in goods and they have the supply chain.
[6:35] SPEAKER_02: They're basically updating a book,
[6:37] SPEAKER_02: but everybody's communicating,
[6:38] SPEAKER_02: coordinating and arriving at a consensus what the current state is.
[6:43] Cryptocurrency specifically is an adaptation of a blockchain
[6:47] that is designed for payments.
[6:49] SPEAKER_02: And so we are able to use a blockchain to drive payments.
[6:53] SPEAKER_02: And that's how we came up with the Bitcoin white paper.
[6:56] SPEAKER_02: And the COVID is a very strong push for removing of intermediaries.
[7:02] And removing of the fees and the costs and the challenges and
[7:06] the value accrual
[7:07] SPEAKER_02: that goes to intermediaries when you're looking at the financial sector.
[7:10] SPEAKER_02: Anybody in the network could actually participate.
[7:13] SPEAKER_02: So you don't need to be authorized by anybody.
[7:16] SPEAKER_02: Everybody has equality of like access.
[7:19] And so with that,
[7:20] we have the framework from which now we began to see the
[7:23] buildings.
[7:24] SPEAKER_02: If you're going through the history,
[7:25] SPEAKER_02: there was a Bitcoin white paper that essentially started us off in 2008.
[7:29] That was the first implementation of a blockchain inside of a
[7:33] payment ecosystem and framework.
[7:36] And then from there,
[7:37] we moved on and we saw the development of multiple other
[7:40] implementations.
[7:41] SPEAKER_02: I think the most notable is Ethereum,
[7:43] SPEAKER_02: which allowed us not only to use payments,
[7:45] SPEAKER_02: but also to build decentralized applications on top of that.
[7:49] And with the building of applications now,
[7:52] you could now define different primitives.
[7:55] SPEAKER_02: You could build decentralized finance.
[7:57] SPEAKER_02: You could build.
[7:58] SPEAKER_02: So if you're looking at like lending markets,
[8:00] now you have lending markets that exist on the blockchain that
[8:04] do not need a party
[8:06] SPEAKER_02: to actually determine you need to fill out this loan form.
[8:09] SPEAKER_02: You need to do this.
[8:09] SPEAKER_02: You need to do that.
[8:10] SPEAKER_02: You could just access lending and credit markets directly.
[8:14] SPEAKER_02: Right.
[8:14] SPEAKER_02: Right.
[8:14] SPEAKER_02: Right.
[8:14] SPEAKER_02: Right.
[8:32] SPEAKER_02: If you're looking at aspects of anti-money laundering,
[8:35] SPEAKER_02: counterterrorism financing,
[8:37] SPEAKER_02: and other nefarious uses of payments,
[8:40] then the blockchain kind of lends itself very easily to those
[8:43] kinds of permutations
[8:45] SPEAKER_02: and those kinds of use cases.
[8:47] But I will also put in a plug here and point out that
[8:52] blockchains by default are public.
[8:54] SPEAKER_02: And because blockchains are essentially public by nature,
[8:57] SPEAKER_02: it's not that they're being used to drive massive volumes.
[9:00] But money laundering and counter service and financing can
[9:03] still occur on blockchains.
[9:05] SPEAKER_02: And so there's a lot of different people who would benefit from a lack of
[9:09] SPEAKER_02: regulation or lack of legal clarity inside of any given jurisdiction.
[9:14] And so this is the background of the basis that FATF came up
[9:19] with what they call
[9:20] Recommendation 15 and Recommendation 16 is out of their rule
[9:24] set for countries
[9:25] SPEAKER_02: where they want countries to take a stance on crypto,
[9:29] SPEAKER_02: which is either banned or regulated.
[9:32] SPEAKER_02: And for a few years, FATF and various...
[9:36] SPEAKER_02: Global organizations were trying to engage with the CBK,
[9:38] but the CBK wasn't taking them on because we had the circular
[9:42] that was a cautionary
[9:43] SPEAKER_02: circular basically allowed crypto to exist in this gray area.
[9:48] SPEAKER_02: Now,
[9:48] what that gray area kind of creates is a reality where there's
[9:52] very little
[9:52] SPEAKER_02: accountability,
[9:53] SPEAKER_02: there's very little transparency.
[9:54] SPEAKER_02: And FATF engaged the government on several occasions.
[9:58] SPEAKER_02: Nothing was worth coming.
[9:59] And so in February 2024,
[10:01] they slapped us with the gray list classification.
[10:04] And that is what finally got the government looking into what
[10:07] are we going to do about crypto?
[10:09] And so now we stand at this particular juncture where there
[10:12] have been concerted
[10:14] SPEAKER_02: efforts by the CMA,
[10:15] SPEAKER_02: by the CBK,
[10:17] SPEAKER_02: by the Treasury to come up with common sense regulation.
[10:20] SPEAKER_02: And I think they've done an amazing job.
[10:21] If you're looking at the first draft of the bill that came
[10:24] before the House,
[10:25] SPEAKER_02: that was a really good piece of legislation as best as they could,
[10:29] SPEAKER_02: given that this is a space where everything is new.
[10:33] SPEAKER_02: So you can't really go around benchmarking in different jurisdictions.
[10:36] SPEAKER_02: Kenya has taken the bold move to actually write common sense legislation,
[10:40] SPEAKER_02: and that's where we currently stand.
[10:42] SPEAKER_02: So the bill,
[10:43] SPEAKER_02: if I was to give a timeline of what that bill,
[10:46] SPEAKER_02: and I think you actually did,
[10:47] is that the bill was initially drafted by a technical working
[10:51] group that comprised
[10:52] SPEAKER_02: of the Capital Markets Authority,
[10:55] SPEAKER_02: the Central Bank of Kenya,
[10:56] SPEAKER_02: the Treasury,
[10:57] SPEAKER_02: So National Reporting Center,
[10:59] SPEAKER_02: FRC,
[10:59] and various other three-letter agencies inside of the Kenan
[11:03] ecosystem that
[11:04] SPEAKER_02: contributed to this particular bill.
[11:06] SPEAKER_02: So they drafted the bill,
[11:07] SPEAKER_02: and then I think in January,
[11:08] they opened it up for public participation and also stakeholder
[11:11] engagement.
[11:12] So the chamber was one of the many organizations that was
[11:15] invited to give direct
[11:17] SPEAKER_02: feedback on what that bill would look like.
[11:19] And the chamber went to Naivasha,
[11:21] and we had a couple of different people there with us.
[11:24] SPEAKER_02: And we gave feedback on what the bill would look like.
[11:26] SPEAKER_02: A lot of our proposals were actually adopted.
[11:29] SPEAKER_02: And we began to engage with the regulators on a more personal basis.
[11:33] SPEAKER_02: Now,
[11:33] SPEAKER_02: we are no longer just the crypto guys,
[11:35] SPEAKER_02: but we had legal professionals who comprise the chamber.
[11:40] SPEAKER_02: And we also had startup founders as well.
[11:42] SPEAKER_02: And so that kicked off the whole engagement.
[11:45] SPEAKER_02: And then we saw the bill
[11:47] SPEAKER_02: then be sponsored.
[11:48] The bill was actually sponsored by the leader of majority and
[11:51] not Kimani Korea.
[11:53] SPEAKER_02: But the leader of majority sponsored the bill,
[11:55] SPEAKER_02: brought it before the House,
[11:56] SPEAKER_02: and we had the first reading.
[11:57] SPEAKER_02: And then that then kicked off public participation,
[12:00] SPEAKER_02: where you have the Committee on Finance and National Planning.
[12:04] SPEAKER_02: They went around the country getting feedback from various counties,
[12:07] SPEAKER_02: but then also they had stakeholders who were supposed to give feedback.
[12:11] SPEAKER_02: And I think of the stakeholders, there were about nine who did it.
[12:14] SPEAKER_02: I may not mention all of them,
[12:16] SPEAKER_02: but there's Oxygen,
[12:17] SPEAKER_02: there's Crete and Africa,
[12:19] SPEAKER_02: Anjawala,
[12:20] SPEAKER_02: Bowmans,
[12:21] SPEAKER_02: the Virtual Asset of Trib Chamber of Commerce as well,
[12:23] SPEAKER_02: and a few others that I may not remember at this point in time,
[12:27] SPEAKER_02: who all give technical feedback.
[12:29] And a lot of those proposals were actually adopted,
[12:32] if you look at the report of the committee.
[12:34] And so now we start at a place where we're waiting for you to
[12:36] go for third reading
[12:37] SPEAKER_02: and potential essential.
[12:39] SPEAKER_02: But that's the background and why we're here today.
[12:42] Good scene setting there and giving us some contextual
[12:44] perspective around how we
[12:46] SPEAKER_01: have landed ourselves in this position.
[12:48] SPEAKER_01: And now that we have already ushered in the bill,
[12:50] because we have understood how we came in on the way from the
[12:53] gray listing to the
[12:54] requirements of how we can remedy our position and the
[12:56] requirement of virtual
[12:57] SPEAKER_01: assets,
[12:58] SPEAKER_01: service providers,
[12:59] SPEAKER_01: regulation.
[13:00] Let's now talk about the nuances that we have seen on the floor
[13:04] of the hub.
[13:04] SPEAKER_01: First,
[13:04] SPEAKER_01: remember this bill when it was stable,
[13:07] SPEAKER_01: of course,
[13:07] it went through the portions and there was family participation
[13:09] and some feedback
[13:10] SPEAKER_01: came out.
[13:11] SPEAKER_01: So to only help us make sense of this,
[13:13] SPEAKER_01: if you look at the draft bill,
[13:15] SPEAKER_01: and I had the privilege of sitting through the submissions of this bill,
[13:17] SPEAKER_01: the public participation,
[13:19] it provided that a virtual asset is a digital representation of
[13:22] value that can be
[13:23] digitally traded or transferred and can be used for payment or
[13:27] investment purposes
[13:29] SPEAKER_01: and does not include digital representation of fiat currencies,
[13:32] SPEAKER_01: e-money securities,
[13:33] SPEAKER_01: and other financial assets.
[13:35] The amendment that we saw coming to the floor of the house was
[13:38] an amendment to have
[13:39] that a virtual asset is a digital representation of the value
[13:43] that is intended to
[13:44] SPEAKER_01: represent real world assets on blockchain or any other technology,
[13:48] SPEAKER_01: whether cryptographically secured or otherwise.
[13:52] SPEAKER_01: This amendment sparked so much debate.
[13:55] SPEAKER_01: I mean, why is it critical, John?
[13:57] SPEAKER_02: For background, I'll say this.
[13:58] So I have experience with legislative drafting simply because
[14:03] my wife has been a
[14:04] SPEAKER_02: legislative drafter.
[14:05] SPEAKER_02: And the refrain she always makes is that the devil is in the details,
[14:09] SPEAKER_02: especially when it comes to legislative drafting.
[14:11] SPEAKER_02: So I'll give you an example.
[14:12] In the Kenan context,
[14:13] there was the Computer Misuse Act,
[14:15] I think,
[14:15] of 2018.
[14:17] where I think the law defined false publications and things of
[14:21] that nature in a very vague way.
[14:23] SPEAKER_02: And it actually impacted on press freedom.
[14:27] SPEAKER_02: I don't know if you guys remember that,
[14:28] SPEAKER_02: but Okiong Tata and a group of other people took them to court.
[14:32] SPEAKER_02: Because of the lack of legal clarity,
[14:34] it opened the door to extra constitutional powers that enforced
[14:38] practices could be
[14:39] able to take against people who are deemed to have put out a
[14:42] false publication.
[14:43] So I think one of them was the Bloggers Association of Kenya
[14:47] that actually joined
[14:48] SPEAKER_02: Honorable Okirom Tata on the matter.
[14:51] SPEAKER_02: And when it went before,
[14:53] SPEAKER_02: I think,
[14:53] SPEAKER_02: the Supreme Court,
[14:55] the Supreme Court actually ruled that particular clause was
[14:57] unconstitutional.
[14:59] SPEAKER_02: Now, why do I bring this up?
[15:00] I'm just giving you an example of what it means when you spend
[15:03] time defining things
[15:05] SPEAKER_02: from a legal standpoint.
[15:06] SPEAKER_02: So I'll read the first definition that came from the draft bill,
[15:11] which is a digital representation of value that can be
[15:14] digitally traded or
[15:15] transferred and can be used for payment or investment purposes
[15:19] and does not include
[15:20] SPEAKER_02: digital representation of fiat,
[15:21] SPEAKER_02: currency,
[15:22] SPEAKER_02: e-money,
[15:22] SPEAKER_02: securities and other financial assets.
[15:25] SPEAKER_02: So when you're doing legislative drafting,
[15:27] this first definition indexes or optimizes for what a virtual
[15:31] asset is not.
[15:33] But then when you're looking at the second definition that came
[15:36] from the House
[15:36] SPEAKER_02: Committee,
[15:37] it is more specific because it actually mentions a digital
[15:41] representation of value
[15:42] that is intended to represent a real world asset on a
[15:45] blockchain or any other
[15:46] SPEAKER_02: technology,
[15:47] SPEAKER_02: whether cryptographically secured or otherwise.
[15:49] SPEAKER_02: So the second definition that actually came from the committee,
[15:52] and I think was on the basis of the submission of one of the
[15:55] stakeholders,
[15:56] SPEAKER_02: is very clearly defined what it is.
[15:59] SPEAKER_02: So if I am tasked with the requirement to define who Julius is,
[16:03] SPEAKER_02: I will not start by saying who Julius is not.
[16:08] SPEAKER_02: I start by saying he is a father, husband.
[16:11] SPEAKER_02: There's like very clear definitions of actually applying to that.
[16:15] SPEAKER_02: But why is this important?
[16:17] SPEAKER_02: is in the context of enforcement and in the context of legal definitions,
[16:21] SPEAKER_02: when you spend more time defining what something is,
[16:24] it's easier for people to understand the spirit of the law and
[16:28] to understand
[16:29] SPEAKER_02: exactly what we are actually dealing with here.
[16:31] And so the explicit mention of blockchain or any other
[16:35] technology makes it very clear.
[16:36] SPEAKER_02: So we no longer need to define fiat currencies,
[16:39] SPEAKER_02: e-money,
[16:40] securities or other financial assets because that then opens
[16:43] the door to a very
[16:44] SPEAKER_02: broad perspective.
[16:45] SPEAKER_02: definition of what it's not.
[16:46] SPEAKER_02: And it's now very easy that if my name is Tuskeez or Naivas,
[16:51] SPEAKER_02: and I want to put the point system for my supermarket on a blockchain,
[16:55] SPEAKER_02: it becomes a virtual asset.
[16:56] SPEAKER_02: But if I don't, it's fine.
[16:58] SPEAKER_02: So the law,
[16:59] this was just designed to ensure that we have very clear legal
[17:03] clarity in terms of
[17:04] SPEAKER_02: what a virtual asset actually is,
[17:06] SPEAKER_02: and rather than indexing on what it is not.
[17:08] SPEAKER_01: And maybe now that we are on that tangent,
[17:10] SPEAKER_01: Tony,
[17:11] speak to this within the context of the guidance we have seen
[17:14] from the Financial
[17:15] Action Task Force as far as clarity and risk-based approach in
[17:19] virtual asset
[17:20] SPEAKER_01: service providers is concerned.
[17:22] SPEAKER_01: I think that would be very critical here.
[17:24] SPEAKER_02: So again,
[17:25] SPEAKER_02: if you're looking at the FATF recommendations on virtual assets,
[17:30] SPEAKER_02: virtual asset service providers,
[17:32] this is something that they would have started in 2018 in terms
[17:35] of the list of
[17:35] SPEAKER_02: recommendations they have.
[17:36] SPEAKER_02: There's recommendation 15,
[17:37] SPEAKER_02: 16,
[17:37] and they've been updating it even up to last year in terms of
[17:41] what is needed for
[17:42] you to be able to actually have sound regulation instead of a
[17:46] given jurisdiction.
[17:48] And a lot of what they're actually looking at is they have like
[17:51] about 15 recommendations
[17:53] SPEAKER_02: for virtual assets,
[17:55] SPEAKER_02: which I won't go into right now,
[17:57] SPEAKER_02: but essentially from a country standpoint,
[17:59] they would just want to make sure that we have very strong
[18:02] anti-money laundering
[18:03] and counter-terrorism framework that ensures that any kind of
[18:06] risks stemming from
[18:07] virtual assets activities or these kinds of technologies have
[18:10] like appropriate
[18:11] SPEAKER_02: mitigation measures.
[18:13] Another area that they want to ensure that we actually have
[18:16] clarity on is the licensing.
[18:18] SPEAKER_02: and registration of virtual asset service providers.
[18:21] And so it's important that you're able to license virtual asset
[18:24] service providers
[18:25] SPEAKER_02: because they are the ones that you could hold to account.
[18:28] SPEAKER_02: So unlicensed providers would have to be identified and sanctioned.
[18:32] SPEAKER_02: But from a regulation standpoint,
[18:35] If it is that you were indexing on just focusing on virtualized
[18:38] service providers,
[18:39] SPEAKER_02: then you could hold them to account.
[18:41] SPEAKER_02: You could define capital requirements.
[18:44] SPEAKER_02: You could define solvency.
[18:46] SPEAKER_02: You could define physical location requirements.
[18:49] SPEAKER_02: You could define fit and proper tests.
[18:50] And these are all aspects that have been defined inside of this
[18:53] particular bill
[18:54] that would have been inspired by some of the standards that
[18:56] apply to traditional
[18:57] SPEAKER_02: finance as well.
[18:59] SPEAKER_02: And so those are some of the realities that FATF actually contemplated.
[19:04] And there's a lot of things that they actually also add on if
[19:08] you're looking at
[19:09] SPEAKER_02: from an AML and a consumerism finance standpoint,
[19:12] SPEAKER_02: where they're asking for due diligence threshold.
[19:15] So if you have a transaction above a certain value,
[19:18] then you need to be able to record that.
[19:20] And there's a small detail there called the travel rule,
[19:23] which was not even covered here.
[19:25] But essentially travel rule would speak to the need for any
[19:29] kind of virtual asset
[19:30] transaction that goes above the threshold of a thousand USD be
[19:35] accompanied by
[19:35] SPEAKER_02: subsequent information that identifies both the recipient and the sender.
[19:41] SPEAKER_02: And then also then there has to be a very strong sanctions framework.
[19:45] SPEAKER_02: That is put in place so that you're able to serve as a deterrent,
[19:49] SPEAKER_02: that if you're looking at this bill,
[19:51] that there are very hefty fines and penalties that have been
[19:54] defined that are
[19:55] designed to ensure that any kind of nefarious actor would face
[19:59] very strong
[20:01] SPEAKER_02: consequences for not being in compliance with this particular act.
[20:06] SPEAKER_02: And then also it lays down a framework for international cooperation.
[20:11] And a lot of what that recommendation kind of deals with is how
[20:14] are we going to
[20:15] SPEAKER_02: exchange information?
[20:16] SPEAKER_02: What does mutual legal assistance look like?
[20:19] And how are we going to combat cross-border virtual asset
[20:23] related money laundering
[20:24] SPEAKER_02: and terrorist financing?
[20:25] So those are the highlights of what FATF kind of expects from a
[20:29] given jurisdiction.
[20:30] I don't think it's particularly exhaustive because inside of
[20:33] the Kenan context,
[20:34] SPEAKER_02: there's things that we still need to define.
[20:36] SPEAKER_02: Like, for instance, how are we going to be doing recoveries?
[20:39] What's the role of the intelligence community in being able to
[20:43] do intelligence,
[20:44] but also just like also enforcement in terms of being able to
[20:48] do asset recovery?
[20:49] SPEAKER_02: What does the custody of the assets that have been recovered look like,
[20:53] SPEAKER_02: given that we have virtual assets?
[20:54] SPEAKER_02: There's very many aspects of this that we still need to define.
[20:58] SPEAKER_02: But the reality is that for the intelligence community,
[21:00] they have a massive undertaking when you're looking at the
[21:04] regulation of like
[21:05] SPEAKER_02: virtual assets,
[21:05] SPEAKER_02: because these are very lucrative areas of endeavor.
[21:09] SPEAKER_02: And so with that, it attracts a certain type of people.
[21:12] SPEAKER_02: And as a country,
[21:14] I think the role of the intelligence community would be in
[21:16] ensuring and guiding the
[21:18] regulators in terms of setting up very strong safeguards to
[21:21] ensure that the
[21:22] SPEAKER_02: financial security and harmony of the Finland ecosystem remains the same.
[21:27] SPEAKER_01: Thanks.
[21:27] SPEAKER_01: Thanks for that, Tony.
[21:28] SPEAKER_01: And as Tony did mention,
[21:29] you can always find these guidelines on the website of the
[21:31] Financial Action Task
[21:32] SPEAKER_01: Force.
[21:32] It's something which I always advise that we come through every
[21:35] so often because a
[21:36] SPEAKER_01: global environment is evolving as far as anti-money lottery is concerned.
[21:40] SPEAKER_01: Tony,
[21:40] one of the things which I remember really stood out during the
[21:43] submission of
[21:44] SPEAKER_01: comments on this bill and was submitted by a number of parties was the
[21:48] SPEAKER_01: applicability of these provisions.
[21:50] SPEAKER_01: So the draft bill had limited the scope of applicability to companies.
[22:00] This was just one of those aspects of,
[22:06] again,
[22:06] the devil is in the details.
[22:08] I think the spirit of the draft bill was that they just wanted
[22:10] to make sure that an
[22:12] SPEAKER_02: individual cannot function as a virtual asset service provider.
[22:17] So me as Tony,
[22:18] I can't wake up today and start to provide services as an
[22:21] individual.
[22:22] SPEAKER_02: They wanted that to be done under a company,
[22:25] SPEAKER_02: so a body corporate that's registered under the Companies Act.
[22:29] SPEAKER_02: But again,
[22:30] SPEAKER_02: because it was oversighted,
[22:31] which is why it's important to have public participation and
[22:34] people able to chime
[22:35] SPEAKER_02: in,
[22:35] is that that definition was just expanded to ensure that if you
[22:38] have a registered
[22:39] SPEAKER_02: partnership,
[22:40] SPEAKER_02: then it's actually eligible for that.
[22:42] And so that really is the spirit of it,
[22:44] where it's just becoming more inclusive.
[22:47] But let's remember that the whole point of that particular
[22:50] clause is that an
[22:51] individual cannot stand up and decide today that I'm going to
[22:54] be a virtual asset
[22:55] SPEAKER_02: service provider.
[22:56] That should be done as a company because it's easier for the
[23:00] regulators to hold a
[23:00] SPEAKER_01: company to account.
[23:02] SPEAKER_01: Something which I saw eliciting a lot of chatter,
[23:05] SPEAKER_01: especially around the circles,
[23:06] I'm interested in this matter was the provision of the
[23:09] legislation will not apply
[23:10] SPEAKER_01: to digital representations within closed ecosystems.
[23:14] SPEAKER_01: Help us understand what does this mean?
[23:16] SPEAKER_01: Why is it critical?
[23:17] SPEAKER_02: So if you're looking at the blockchain examples,
[23:20] you remember I said this could be a trauma that we are
[23:23] basically running and we're
[23:25] using this trauma to do whatever economic activity that we are
[23:28] organizing around.
[23:30] Now,
[23:30] the blockchain as a technological innovation could be used in
[23:35] two ways.
[23:36] SPEAKER_02: It could be used where it's publicly accessible.
[23:39] where anybody could be able to go and create an account and
[23:42] begin to trade value
[23:44] and figure out how to deposit funds and how to purchase virtual
[23:47] assets or anything
[23:48] SPEAKER_02: of that sort.
[23:49] Or you could use it as a closed ecosystem where you're using it
[23:53] as a company that
[23:54] SPEAKER_02: is leveraging that whole dynamic where nobody could change the order of
[23:59] SPEAKER_02: transactions.
[23:59] SPEAKER_02: Everybody has a copy of the ledger and so on and so forth.
[24:02] And so blockchain as a tool could be very well adapted for very
[24:06] many use cases.
[24:08] SPEAKER_02: One of them famously is Walmart.
[24:10] SPEAKER_02: So Walmart has the entire supply chain running on top of a blockchain.
[24:14] SPEAKER_02: And what that means is that for Walmart and a company of its size,
[24:18] SPEAKER_02: which is a global supermarket,
[24:19] SPEAKER_02: essentially,
[24:20] SPEAKER_02: it's able to track all of its suppliers on a blockchain.
[24:24] SPEAKER_02: And what that means is that nobody could actually change
[24:27] SPEAKER_02: the delivery date of when something is actually being done.
[24:30] SPEAKER_02: So from a fraud perspective,
[24:31] you could imagine if you had the ability for say Nakumat to
[24:36] have implemented a
[24:37] SPEAKER_02: blockchain system to run everything that would have happened,
[24:40] SPEAKER_02: who knows,
[24:40] maybe it would have survived today because there was no room
[24:43] for any kind of
[24:44] SPEAKER_02: adjustment and would have been very clear
[24:47] who the debtors would have been,
[24:49] what the liabilities are,
[24:50] and so on and so forth.
[24:51] SPEAKER_02: So if you're looking at a closed ecosystem like that,
[24:55] SPEAKER_02: where access is crucially permissioned,
[24:58] then this particular legislation would not have applied to a
[25:02] Nakumak blockchain
[25:03] SPEAKER_02: supply chain system.
[25:05] SPEAKER_02: It would not.
[25:06] And that's important because that then creates a room for
[25:09] innovation for private
[25:11] SPEAKER_02: use cases without necessarily impacting public use.
[25:15] The whole point of the bill is beyond even just creating an
[25:19] environment that is
[25:20] SPEAKER_02: FATF compliant,
[25:21] SPEAKER_02: there's also aspects of consumer protection.
[25:24] SPEAKER_02: So if you're functioning inside of a closed ecosystem,
[25:27] SPEAKER_02: that means Tom,
[25:28] Dick and Harry cannot trade in virtual assets inside of the
[25:32] Nakamura supply chain.
[25:34] There's no need for consumer protection because this is a
[25:37] private use case.
[25:38] But if you're then making it public and you're saying command
[25:41] points are now
[25:41] SPEAKER_02: available,
[25:42] SPEAKER_02: then the question is,
[25:43] SPEAKER_02: who's going to regulate that?
[25:44] SPEAKER_02: How is it going to function?
[25:46] SPEAKER_02: And so on and so forth.
[25:47] SPEAKER_02: And so that really is the spirit of what was intended there.
[25:50] But if you're using it inside of a closed ecosystem or like a
[25:53] private use case,
[25:54] SPEAKER_02: then it makes it very easy for that to occur because you're not under any
[25:58] SPEAKER_01: regulator.
[25:59] SPEAKER_01: Clearly speaking to the question of public interest here.
[26:02] SPEAKER_01: So that was very important to flag there.
[26:04] SPEAKER_01: Something which,
[26:05] SPEAKER_01: and going back to the point you raised,
[26:06] SPEAKER_01: Tony,
[26:07] SPEAKER_01: about the devil being in the detail.
[26:08] If you look at the draft bill on how it captured who an issuer
[26:12] is vis-a-vis what
[26:13] SPEAKER_01: came as an amendment.
[26:15] SPEAKER_01: In the draft bill,
[26:15] we saw an issuer as a person who is authorized to issue an
[26:19] initial virtual asset
[26:20] SPEAKER_01: offering under this act.
[26:21] SPEAKER_01: When the committee came with this report,
[26:23] we saw an expanded definition here of a natural or legal person
[26:27] or any other taking
[26:29] SPEAKER_01: that creates,
[26:29] SPEAKER_01: originates or otherwise less available virtual assets to the public,
[26:33] SPEAKER_01: either through initial offering or any subsequent initials mechanism.
[26:37] SPEAKER_01: Just give us some color around why this change was necessary to us.
[26:41] SPEAKER_02: So if you're looking at the first destination,
[26:44] which was just simply a person who is authorized to issue an
[26:47] initial virtual asset
[26:48] SPEAKER_02: offering,
[26:49] SPEAKER_02: it then leaves room for ambiguity.
[26:53] So let's actually talk about what it means to do a virtual
[26:56] asset offering to begin with.
[26:58] SPEAKER_02: A virtual asset offering would be compared to an IPO.
[27:03] SPEAKER_02: So in the crypto ecosystem,
[27:04] SPEAKER_02: we call these ICOs,
[27:06] SPEAKER_02: so an initial coin offering,
[27:08] SPEAKER_02: or an initial virtual asset offering.
[27:11] that is designed to enable early stage crypto startups be able
[27:15] to generate income
[27:16] SPEAKER_02: from the public.
[27:17] SPEAKER_02: And then in exchange,
[27:18] they basically get a token and that token or that coin would
[27:22] have a speculative
[27:23] SPEAKER_02: value that would increase over time and so on and so forth.
[27:26] SPEAKER_02: And so if you're looking at the first definition,
[27:28] SPEAKER_02: again,
[27:30] SPEAKER_02: the way that it was drafted,
[27:31] SPEAKER_02: it's basically very self-referential in the sense that it says,
[27:35] SPEAKER_02: as long as you're not authorized,
[27:36] SPEAKER_02: then you're not allowed to be able to actually trade,
[27:39] SPEAKER_02: to be able to issue a virtual asset offering.
[27:41] But the committee then amended this definition so that in case
[27:45] anybody thinks of
[27:46] SPEAKER_02: doing this,
[27:47] SPEAKER_02: if you think of any kind of undertaking that creates,
[27:51] SPEAKER_02: originates,
[27:51] SPEAKER_02: or otherwise makes available crypto assets to the public,
[27:55] SPEAKER_02: either through an initial offering or any subsequent issuance mechanism,
[27:59] SPEAKER_02: then you have to be regulated.
[28:01] SPEAKER_02: So again,
[28:02] SPEAKER_02: it's just a more comprehensive definition that is designed to ensure that
[28:05] individuals who want to actually do this would actually have a
[28:10] very clear legal
[28:11] SPEAKER_02: framework.
[28:12] SPEAKER_02: But then also,
[28:12] it also empowers law enforcement and any other enforcement
[28:16] agency to be able to say
[28:17] so-and-so is actually in contravention of the proposed act
[28:21] because they have not
[28:22] SPEAKER_02: sought regulation to be able to actually do this.
[28:25] SPEAKER_02: And why this is important,
[28:27] and it's important for this definition to be more expanded and
[28:30] to be more direct,
[28:32] SPEAKER_02: is because we have the advent of scams that have existed.
[28:36] SPEAKER_02: If you remember CBEX,
[28:37] there's so many others that would have existed where a lot of
[28:40] people went and did
[28:42] SPEAKER_02: an initial virtual asset offering.
[28:44] SPEAKER_02: And they're essentially Ponzi schemes.
[28:46] SPEAKER_02: And the Ponzi schemes would do exactly what Ponzi schemes do,
[28:49] which is eventually collapse and people lose money and they end
[28:52] up hating crypto.
[28:53] And I cannot talk to my uncle during Christmas because he
[28:57] thinks I am a con person.
[28:59] Those are the consequences that we actually pay for being
[29:02] involved inside of this
[29:03] SPEAKER_02: particular industry.
[29:05] SPEAKER_02: But generally speaking,
[29:06] the drafters of the law wanted to create a very strong
[29:09] framework so that we could
[29:10] SPEAKER_02: enhance consumer protection.
[29:12] SPEAKER_02: That essentially is the goal there.
[29:14] SPEAKER_01: Thank you for that, Tony.
[29:14] SPEAKER_01: Now,
[29:15] we have spoken quite a bit about a number of proposals which
[29:18] came from participants
[29:19] SPEAKER_01: such as yourselves,
[29:21] SPEAKER_01: and they were actually adopted by the committee in its final amendments.
[29:24] SPEAKER_01: Let's speak about one which was not adopted.
[29:27] SPEAKER_01: And I saw this coming from a number of industry players,
[29:30] SPEAKER_01: but the committee held the position that
[29:32] SPEAKER_01: As presently drafted, we believe that this definition is exhausted.
[29:36] SPEAKER_01: And that was a question of what exactly is a stablecoin?
[29:39] SPEAKER_01: So if you read the bill as it was and still is,
[29:43] it defines stablecoin as a virtual asset designed to or that
[29:46] aims to have its value
[29:48] SPEAKER_01: fixed or pegged relative to one or more reserve assets,
[29:52] SPEAKER_01: including fiat currency,
[29:53] SPEAKER_01: commodities,
[29:54] SPEAKER_01: or other virtual assets.
[29:56] SPEAKER_01: For the primary purpose of maintaining a stable bond of the stablecoin,
[29:59] SPEAKER_01: a number of industry players gave an alternative view.
[30:02] SPEAKER_01: And I remember interacting with view there.
[30:04] SPEAKER_01: This was not adopted by the house committee.
[30:06] SPEAKER_01: And the house committee retained what was revealed.
[30:09] SPEAKER_01: I wonder where the chamber stood on this matter around a stablecoin.
[30:13] SPEAKER_01: And maybe just walk us through.
[30:14] SPEAKER_01: What exactly is a stablecoin?
[30:16] SPEAKER_01: So if you're looking at,
[30:18] SPEAKER_02: first of all,
[30:18] SPEAKER_02: the chamber did not make any sort of the definition of a stablecoin.
[30:22] SPEAKER_02: But what is a stablecoin?
[30:23] Stablecoins are blockchain or a virtual asset that is tied to
[30:27] the value of a given currency.
[30:30] SPEAKER_02: So I'll give some background.
[30:31] When we had mutual assets like Bitcoin and Ethereum and all of
[30:35] these things emerge,
[30:36] SPEAKER_02: their price was very volatile.
[30:39] SPEAKER_02: Especially in those early days,
[30:40] you could wake up and it's lost 10 or 15% or something of that
[30:44] sort because they're
[30:45] SPEAKER_02: driven by supply and demand.
[30:47] SPEAKER_02: So it's like a fair price.
[30:48] So there was no way we could build fundamental aspects of
[30:53] decentralized finance
[30:54] with shares or things that could be considered securities or
[30:58] things whose price
[30:59] SPEAKER_02: essentially fluctuates.
[31:01] SPEAKER_02: So what then began to happen is a bunch of people came up with U.S.
[31:05] SPEAKER_02: dollar stable coins or coins that are tied to the value of the U.S.
[31:10] SPEAKER_02: dollar.
[31:10] SPEAKER_02: And how it would work was that in the same way,
[31:13] SPEAKER_02: if you look at M-Pesa,
[31:15] SPEAKER_02: do you know where your M-Pesa balance is being held currently?
[31:17] SPEAKER_02: Which bank?
[31:18] SPEAKER_02: That last story.
[31:19] SPEAKER_02: Allegedly, it's being held at NCBA.
[31:21] SPEAKER_02: So if you look at how M-PESA essentially functions,
[31:24] SPEAKER_02: is that the agent,
[31:26] SPEAKER_02: back in the day,
[31:28] SPEAKER_02: when it started off,
[31:29] SPEAKER_02: the agent would deposit money in a bank account in CBA bank at the time.
[31:33] SPEAKER_02: And then Safaricom would transfer that value to the agent.
[31:37] SPEAKER_02: And then the agent now has money in their wallet.
[31:40] SPEAKER_02: And then me and you would go and withdraw.
[31:42] SPEAKER_02: Or rather, if we go to deposit, the agent would hold the cash.
[31:45] And then when they hold the cash,
[31:47] they transfer whatever they got from Safaricom to me.
[31:50] And then I then move on and do that,
[31:51] so on and so forth,
[31:52] so on and so forth.
[31:53] SPEAKER_02: And so in the same way, there was a need for a U.S.
[31:56] dollar version of M-Pesa that sits on the blockchain that
[31:59] existed to be able to
[32:01] SPEAKER_02: facilitate trade.
[32:03] SPEAKER_02: And so a couple of issuers basically came up.
[32:06] There's Tether,
[32:07] there's Circle and a few others who basically had custody
[32:11] arrangements with U.S.
[32:12] SPEAKER_02: banks.
[32:12] SPEAKER_02: So they held the money in a U.S.
[32:14] SPEAKER_02: bank account and then they issued a dollar.
[32:17] SPEAKER_02: on the stable coin.
[32:17] And then that dollar could now be traded and its value would be
[32:21] assumed to be
[32:22] SPEAKER_02: stable one-to-one with the US dollar.
[32:25] And that allow people to build different things and build
[32:28] different applications
[32:29] SPEAKER_02: that leverage the use of stable coins.
[32:32] SPEAKER_02: Now,
[32:32] SPEAKER_02: in the world we live in today,
[32:33] stablecoin transactions have now eclipsed to Visa and
[32:36] MasterCard combined.
[32:38] SPEAKER_02: They are used for cross-border payments.
[32:40] A lot of current businesses are using stablecoins to trade with
[32:43] China simply
[32:44] because you have a US dollar stablecoin that you could
[32:47] immediately transfer without
[32:48] SPEAKER_02: an intermediary directly to a Chinese businessman.
[32:52] SPEAKER_02: And he could then send whatever goods you wanted to actually buy.
[32:56] So with that,
[32:57] there is the reality of the dominance of US dollar stablecoins.
[33:02] And I think currently they were looking at the about $200
[33:05] billion that have been
[33:07] SPEAKER_02: issued on public stablecoins between the two largest issuers.
[33:11] SPEAKER_02: And people are continuing to leverage that.
[33:13] SPEAKER_02: I think Tether is the most successful company per capita,
[33:17] SPEAKER_02: where I think the number of employees divided by the revenue,
[33:20] SPEAKER_02: I think the most efficient is actually Tether,
[33:23] SPEAKER_02: which I think they earned two or three billion last year and they have 60
[33:27] SPEAKER_02: employees.
[33:28] SPEAKER_02: So you have those particular dynamics that have existed.
[33:31] SPEAKER_02: Now,
[33:31] when you're looking at applications inside of the Kenyan
[33:34] context or any other
[33:35] SPEAKER_02: emerging market context,
[33:37] there is a need for us to have local Kenyan stablecoin or
[33:41] stablecoin issuers that
[33:43] SPEAKER_02: emerge that essentially put the Kenyan shilling on chain.
[33:46] And so that is what has led to the definition of wanting to
[33:50] have a stablecoin that
[33:52] exists on public blockchains that people could now use to build
[33:55] different things on
[33:56] SPEAKER_02: top of.
[33:57] And so that is what led to the need for stablecoin legislation
[34:01] to actually be included.
[34:02] SPEAKER_02: A side note was that I was actually the one who advocated for stablecoin
[34:08] SPEAKER_02: legislation to be included in the bill in January when we had the public
[34:12] SPEAKER_02: participation with the technical working group and they accepted it.
[34:15] SPEAKER_02: So I have some background in what this looks like.
[34:18] SPEAKER_02: So delving into the definitions,
[34:20] there were definitions given by various individuals that
[34:25] eventually boiled down to
[34:27] SPEAKER_02: semantics.
[34:28] SPEAKER_02: And so it's a different way of saying the same thing.
[34:31] SPEAKER_02: And that's why a lot of those clauses were not really adopted,
[34:35] simply because it didn't amount to any material difference from
[34:40] a legislative
[34:41] SPEAKER_02: drafting standpoint.
[34:43] And so you could have different individuals who emerge and they
[34:46] want different
[34:47] SPEAKER_02: types of definitions to be enforced.
[34:49] SPEAKER_02: But the reality is that, does it actually meet Eagle Master?
[34:53] SPEAKER_02: And if you're looking at one of them,
[34:55] SPEAKER_02: I think they wanted it to be changed to an asset reference token,
[34:59] SPEAKER_02: which means a crypto asset that aims to maintain a stable value.
[35:02] They're referencing one or more assets,
[35:03] including fiat currencies or commodities.
[35:06] SPEAKER_02: So this person says, I don't like the word stable coin.
[35:08] SPEAKER_02: We should call it an asset reference token.
[35:10] SPEAKER_02: But if you look at the Genius Act that was just passed in the U.S.,
[35:14] SPEAKER_02: it explicitly calls them stable goreys.
[35:16] SPEAKER_02: So those are the kind of trivial submissions that we saw,
[35:20] SPEAKER_02: which didn't really amount to anything.
[35:22] SPEAKER_02: And if I am speaking just as somebody who read the report,
[35:26] SPEAKER_02: because I have no clue the specific reasons that they actually mentioned,
[35:29] SPEAKER_02: which is just the committee observations that are shared with us,
[35:32] SPEAKER_02: I am inclined to agree with those positions.
[35:35] SPEAKER_02: Yeah.
[35:36] SPEAKER_01: Wonderful on that, Tony.
[35:37] I remember the argument that it should have been a specific
[35:40] asset being referenced
[35:41] SPEAKER_01: there,
[35:42] SPEAKER_01: but it was thrown out by the committee.
[35:44] SPEAKER_01: Let's switch gears a bit,
[35:44] SPEAKER_01: Tony,
[35:45] and talk about the licensing requirements as far as the bill is
[35:48] concerned.
[35:49] SPEAKER_01: And if you could just help us understand,
[35:52] SPEAKER_01: if I wanted to be a virtual asset service provider,
[35:55] SPEAKER_01: how does the licensing look like?
[35:57] There's a few categories that have been included in terms of
[36:00] what that would
[36:01] SPEAKER_02: supposed to look like.
[36:02] And you have different regulators who would be licensing
[36:06] different things.
[36:06] SPEAKER_02: You could be an exchange,
[36:07] SPEAKER_02: you could be a wallet,
[36:08] SPEAKER_02: you could be a payment provider,
[36:10] SPEAKER_02: you could be asset manager.
[36:12] And the role there is you're basically running essentially
[36:15] something like a fund.
[36:16] SPEAKER_02: You could give investment advice,
[36:19] SPEAKER_02: which is another aspect of what that would look like,
[36:22] SPEAKER_02: where your role is just advisory and this is informed management.
[36:25] SPEAKER_02: by what would exist even in terms of stocks.
[36:28] SPEAKER_02: So if you're buying regular securities, there's an advisory license.
[36:32] SPEAKER_02: But if you then go and become an investment back,
[36:35] it includes advisory and various other services that you could
[36:38] actually provide.
[36:40] And so the reality of how the bill has been structured is that
[36:43] if you're looking
[36:44] SPEAKER_02: from a payment standpoint,
[36:45] there are some CBK functions that exist if you're trying to
[36:48] register an exchange.
[36:50] SPEAKER_02: But if you're doing an exchange, you're doing that under CMA.
[36:53] SPEAKER_02: But if you're doing a wallet,
[36:54] SPEAKER_02: you have to do that under CBK,
[36:55] which creates a real bit of a challenge there because the
[36:59] largest exchanges have
[37:00] SPEAKER_02: wallets.
[37:01] SPEAKER_02: So what does this mean?
[37:03] But those are the kind of dynamics that kind of exist from a
[37:05] licensing standpoint.
[37:06] SPEAKER_02: where I think there are about nine that have been considered.
[37:09] SPEAKER_02: The initial one included even Bitcoin miners,
[37:12] but thrown out by the technical committee as well by the time
[37:15] the bill came to
[37:16] SPEAKER_02: implementation.
[37:18] And if you're looking at it from a broad way,
[37:21] and just for the sake of public consumption,
[37:23] SPEAKER_02: There is people who are providing payments.
[37:26] There's a separate licensing regime that includes the central
[37:30] bank and then the
[37:31] SPEAKER_02: people who are looking at crypto from an investment standpoint.
[37:34] And those would come under the CMA and they'd be offering
[37:37] services from like
[37:38] initial virtual asset service offerings to investment advisor
[37:42] to crypto fund or
[37:43] SPEAKER_02: something of that sort in the future.
[37:46] SPEAKER_02: But there's still aspects that are not really covered.
[37:49] SPEAKER_02: So if you're looking at the bill,
[37:51] there's a lot of people who provide just deposit and withdrawal
[37:55] services inside of
[37:56] SPEAKER_02: crypto.
[37:56] SPEAKER_02: We call them on and off ramping.
[37:58] SPEAKER_02: So if I am on and off ramper,
[38:01] the only thing I'm doing and I'm focusing on is the ability to
[38:04] be able to get
[38:06] SPEAKER_02: people crypto and pay out their actual crypto.
[38:08] And that particular segment employs a lot of people inside of
[38:12] the ecosystem right now.
[38:13] SPEAKER_02: And it was totally missed.
[38:15] And it's also like unfortunate even for us as a virtual asset
[38:19] chamber that we
[38:20] forgot to make that submission in a way that is clear to really
[38:23] delineate and be
[38:24] SPEAKER_02: clear about what on and off RAM service providers do.
[38:27] SPEAKER_02: Because if you're looking at the licensing framework,
[38:31] SPEAKER_02: on and off RAM service provider is not an exchange.
[38:34] SPEAKER_02: They are not a wallet provider,
[38:36] SPEAKER_02: but they're providing a financial service that serves businesses.
[38:40] And so there are still aspects in which I hope we still have
[38:42] time to be able to
[38:43] bring further clarity and common sense to the licensing
[38:47] categories that actually
[38:48] SPEAKER_02: are being considered.
[38:50] SPEAKER_01: But Tony,
[38:50] SPEAKER_01: on that point,
[38:51] SPEAKER_01: because I took a different view based on what you have said,
[38:53] my view was that because we are discussing the bill which will
[38:57] evolve into the Act,
[38:58] subsequently we should then see regulations which then drill
[39:02] into the kind of
[39:03] SPEAKER_01: granularity you are now bringing out.
[39:04] So I thought maybe a bill in a still should not be overly
[39:08] regulated such that it
[39:09] SPEAKER_01: tends to be a regulation and not an Act subsequently.
[39:11] SPEAKER_01: Don't you think we still have some headroom there?
[39:14] SPEAKER_01: The devil is in the detail.
[39:15] SPEAKER_02: If you're using the example of the on and off farm services,
[39:18] I think that's such a massive segment that it does deserve
[39:23] elevation to the act
[39:24] SPEAKER_02: level,
[39:24] SPEAKER_02: simply because there's a lot of different dynamics that exist there.
[39:27] SPEAKER_02: And so if you're looking at how the regulators initially looked at this,
[39:31] SPEAKER_02: is they were applying a traditional view to this particular sector.
[39:36] Because what they've contemplated as a payment gateway provider
[39:39] license,
[39:40] what does that mean?
[39:40] SPEAKER_02: Who's going to apply for that?
[39:42] SPEAKER_02: It doesn't make any sense.
[39:43] But that makes sense if I'm coming from the paradigm of I
[39:47] regulate payment service
[39:49] SPEAKER_02: providers and I want to regulate crypto payment service providers.
[39:53] SPEAKER_02: In that particular context, it makes sense.
[39:56] SPEAKER_02: The reality is that in actual practice,
[39:58] the people who are providing the services are actually on and
[40:00] off ramps providers.
[40:01] And it would have been beneficial to have the clarity required
[40:05] to be able to ensure
[40:06] that we could now have very clear enforcement and regulatory
[40:10] safeguards in place of
[40:12] SPEAKER_02: the people who are providing the specific service.
[40:14] So you have your payment service providers who already exist
[40:17] and you leave them
[40:18] SPEAKER_02: alone,
[40:18] but you just look at focusing on the actual people who are
[40:21] providing the service.
[40:22] SPEAKER_01: So specificity would have been key in that particular example.
[40:26] SPEAKER_01: Thank you for that, Tony.
[40:27] SPEAKER_01: And in case you want any more detail on this licensing conversation,
[40:30] SPEAKER_01: you can go to part three of the bill right from close number nine.
[40:34] SPEAKER_01: I'm going to flesh it out from that point.
[40:36] But Tony,
[40:36] now that we are at that point,
[40:38] speak to us about the capitalization requirements.
[40:41] I know there was quite a bit of debate during the submissions
[40:44] phase around this.
[40:46] SPEAKER_02: So fortunately or unfortunately,
[40:48] SPEAKER_02: capitalization was not explicitly defined in this particular bill.
[40:53] I think there were a lot of stakeholders who wanted to be able
[40:55] to have that defined at the bill.
[40:57] But I guess to your earlier point in terms of what this looked
[41:00] like is that I think
[41:01] the committee and the initial drafters of the bill were looking
[41:04] at this more as an
[41:06] SPEAKER_02: act.
[41:07] And then subsequent regulation would come from the cabinet
[41:10] secretary for finance,
[41:12] who would then define what the capitalization requirements for
[41:15] each of these
[41:15] SPEAKER_02: licensing categories would look like.
[41:17] SPEAKER_02: There's benefits and there's pros and cons for either approach.
[41:22] SPEAKER_02: If you have it defined by the cabinet secretary,
[41:25] that it means that it could change in a way that does not
[41:29] require a whole further
[41:31] SPEAKER_02: intervention by legislators.
[41:33] But then also the con is that we're concentrating a lot of that
[41:37] decision making on
[41:37] SPEAKER_02: a single individual.
[41:38] And licensing is something that is very difficult to navigate
[41:43] inside of the Kenyan ecosystem.
[41:45] How many people are waiting for PSP licenses from CBK at this
[41:49] particular point in time?
[41:50] So maybe there might have been benefit in having explicit
[41:53] capital requirements defined.
[41:55] SPEAKER_02: But I think given the nascent nature of this industry,
[41:59] SPEAKER_02: the fact that this is brand new,
[42:00] I think there's room for us to have that defined at the cabinet
[42:04] secretary level.
[42:05] SPEAKER_02: And then we'll continue to adjust.
[42:07] SPEAKER_02: Why?
[42:07] Because you want to maintain a balance between supporting local
[42:11] innovators in a way
[42:12] SPEAKER_02: that makes sense.
[42:13] SPEAKER_02: And so...
[42:14] If you have a couple of university students and they have this
[42:18] brilliant innovation
[42:19] SPEAKER_02: and then they are stymied by a capital requirement,
[42:22] SPEAKER_02: then that would be really unfortunate.
[42:23] But then you also have a global exchange that functions in n
[42:27] number of countries
[42:29] SPEAKER_02: and they want to enter the Kenyan ecosystem.
[42:31] SPEAKER_02: And there needs to be a different set of capital requirements for them.
[42:33] And so I think having the cabinet secretary have the discretion
[42:36] at this point in
[42:37] SPEAKER_02: time perhaps makes a little bit more sense.
[42:40] SPEAKER_02: And maybe over time you could see how to flex that.
[42:43] SPEAKER_01: Tony,
[42:43] SPEAKER_01: to your point,
[42:44] SPEAKER_01: were you of the view,
[42:45] SPEAKER_01: and I saw a number of submissions are vouching for this,
[42:47] but then we should have a staggered or tiered kind of capital
[42:51] requirements
[42:51] SPEAKER_01: depending on the scale and size of the player.
[42:53] SPEAKER_01: Is that a view that the chamber would have backed up?
[42:56] Yes,
[42:57] I think that is something that we actually spoke to legislators
[42:59] about quite a bit.
[43:01] SPEAKER_02: I think the other thing that's missing for local innovator is a sandbox.
[43:06] SPEAKER_02: If you have a sandbox,
[43:07] SPEAKER_02: and that significantly reduces any kind of capital requirements for local
[43:11] SPEAKER_02: innovators,
[43:11] If I'm building a brand new Bitcoin L2 and you're going to give
[43:15] me onerous capital
[43:17] SPEAKER_02: requirements,
[43:17] SPEAKER_02: then it won't really work.
[43:18] SPEAKER_02: The whole point of a startup,
[43:20] SPEAKER_02: if you remember,
[43:20] SPEAKER_02: the goal at your initial phases is to find a sustainable business model.
[43:25] And regulations should be geared in a way that it supports
[43:28] local innovation,
[43:29] while also ensuring that we have a tiered model that would
[43:32] ensure that we could
[43:33] SPEAKER_02: actually not be taken advantage of by international players.
[43:37] SPEAKER_02: And so the balance does need to exist.
[43:39] SPEAKER_02: I think a sandbox does need to exist.
[43:41] SPEAKER_02: I think a tiered approach would be deeply necessary.
[43:44] And it is our hope that the cabinet secretary would consider
[43:48] all of these things.
[43:49] And also from a regulation standpoint,
[43:51] that all of these things would be considered.
[43:54] SPEAKER_01: It's interesting that you tabled the case for a sandbox,
[43:56] because when I tabled this very proposal to the Finance and
[43:59] Planning Committee on
[44:00] SPEAKER_01: this subject,
[44:01] SPEAKER_01: I was told that if you read the bill,
[44:03] one of the competent authorities identified there is the
[44:05] Capital Max Authority.
[44:06] SPEAKER_01: Now,
[44:06] the Capital Max Authority has already structured a regulatory
[44:09] sandbox for testing,
[44:11] SPEAKER_01: and it's not limited to any asset class.
[44:14] SPEAKER_01: The virtual assets could themselves be able to go there and test.
[44:17] SPEAKER_01: Would that be applicable for you to apply?
[44:19] SPEAKER_02: But where is that defined in law, Julian?
[44:21] SPEAKER_02: It's actually not in this bill.
[44:22] SPEAKER_02: Yeah, it's not in this bill.
[44:24] SPEAKER_02: And that is my point.
[44:25] So I think it would have benefited from an explicit mention
[44:28] that kind of allows
[44:30] SPEAKER_02: that to be able to actually happen.
[44:31] SPEAKER_02: But yeah,
[44:31] SPEAKER_02: nevertheless,
[44:32] SPEAKER_02: the reality of having the sandbox inside of the CMA makes a lot of sense.
[44:37] SPEAKER_02: But also,
[44:38] SPEAKER_02: you would be limited by the remit of the CMA,
[44:42] SPEAKER_02: even in your sandbox application,
[44:43] simply because what if I'm building something that has central
[44:46] bank implications?
[44:48] SPEAKER_02: All right.
[44:48] SPEAKER_01: All right.
[44:49] SPEAKER_01: Tony, we have talked about CMA.
[44:51] SPEAKER_01: We have talked about Central Bank.
[44:52] One of the issues around the competent authority prescription
[44:56] in this bill has been
[44:57] SPEAKER_01: the skepticism by some,
[44:59] SPEAKER_01: never mind if the third schedule seems to give some clarity,
[45:02] that there could be ambiguity in terms of the jurisdiction as
[45:05] to which authority
[45:07] SPEAKER_01: applies where.
[45:08] SPEAKER_01: Is that a concern that you share as the chamber?
[45:10] SPEAKER_02: Yes,
[45:10] I think it was us and Anjawala Khan that recommended the
[45:14] setting up of a joint
[45:16] SPEAKER_02: virtual asset regulatory authority.
[45:19] SPEAKER_02: And why this would be important is one, this is a brand new asset class.
[45:23] SPEAKER_02: There needs to be a very clear regulatory framework that is set up.
[45:28] The current design of it is that certain functions will be
[45:32] licensed by Central Bank of Kenya.
[45:34] SPEAKER_02: Certain functions will be licensed by the Capital Markets Authority.
[45:37] SPEAKER_02: There's nothing wrong with that.
[45:38] SPEAKER_02: I don't have a problem.
[45:39] SPEAKER_02: But if you're looking at the backlog at Central Bank at the moment,
[45:43] I think digital lenders is how many thousand that have not yet
[45:46] received a license.
[45:47] SPEAKER_02: How many people are still waiting for a PSP license?
[45:50] And what confidence do we have that we would be able to get
[45:54] licenses in a timely
[45:55] SPEAKER_02: fashion for virtual access service providers?
[45:57] SPEAKER_02: But crucially, the question is, what is at stake?
[46:00] In the case where we have a regulator that is not able to
[46:03] respond in a timely
[46:04] SPEAKER_02: fashion to the industry,
[46:05] SPEAKER_02: is that we will get left behind.
[46:07] Nigeria is currently attracting the most investment into
[46:12] virtual assets in Africa.
[46:14] SPEAKER_02: Ethiopia is probably the fastest growing destination for virtual assets.
[46:18] South Africa is actually ahead of us where they already have a
[46:22] regulatory framework
[46:23] SPEAKER_02: and they have licensed,
[46:26] SPEAKER_02: I think within the first three months,
[46:28] they had about 300 applications of virtual asset service
[46:32] provider licenses.
[46:34] So this is not like the difference between virtual assets and
[46:38] the traditional
[46:39] SPEAKER_02: payments infrastructure,
[46:40] SPEAKER_02: PSPs,
[46:41] SPEAKER_02: digital lenders and all of those people,
[46:43] is that this is very different because we need to compete at a
[46:45] global level.
[46:46] SPEAKER_02: And we need a regulator that is designed,
[46:49] SPEAKER_02: that is purpose-built,
[46:51] SPEAKER_02: that is efficient,
[46:52] that will support the local industry to take its rightful place
[46:56] as a Silicon
[46:56] SPEAKER_02: Savannah.
[46:57] If we have an instance in which the regulator that we have is
[47:01] unresponsive for one
[47:03] SPEAKER_02: month,
[47:03] SPEAKER_02: two months,
[47:04] SPEAKER_02: investors begin to have a negative view on Kenyan startups.
[47:08] SPEAKER_02: I don't know how to make this point very clear,
[47:10] SPEAKER_02: but as somebody who sat and has had to raise venture,
[47:13] SPEAKER_02: perception matters a lot.
[47:15] And so we need a regulator that is going to be working
[47:18] efficiently,
[47:19] right?
[47:20] We need a regulator that is going to create a enabling
[47:22] regulatory environment.
[47:23] And so if we have a virtual assets of regulatory authority that
[47:27] is set up purpose-built,
[47:28] Where if I have investors coming from California or from
[47:32] Singapore or from China,
[47:33] SPEAKER_02: I could take them to one office and be like,
[47:35] SPEAKER_02: yeah,
[47:35] SPEAKER_02: these are the regulators.
[47:36] And the regulators could engage with those investors and
[47:39] investors could have a
[47:40] SPEAKER_02: very positive view.
[47:41] SPEAKER_02: In the initial draft of the bill,
[47:43] I would have to take those people to CMA and then potentially
[47:46] book a meeting at CBK
[47:47] SPEAKER_02: and then take them to CBK.
[47:48] SPEAKER_02: But if you have a single regulator,
[47:50] SPEAKER_02: then you have a very clear means for that to actually happen.
[47:53] SPEAKER_02: Now,
[47:53] SPEAKER_02: if you look at the FATF recommendation on this particular question,
[47:58] FATF itself recommends and says we could have the traditional
[48:02] approach where you
[48:02] SPEAKER_02: have the existing regulators come in and try to do that.
[48:06] And jurisdictions that will do that will probably have a
[48:09] quicker lead time in terms
[48:11] SPEAKER_02: of the implementation of the law.
[48:13] SPEAKER_02: But longer term,
[48:15] it is more beneficial to have a dedicated regulator looking at
[48:20] virtual assets
[48:20] because if somebody is waking up every day looking at one thing
[48:24] and one sector and
[48:26] SPEAKER_02: one industry,
[48:27] SPEAKER_02: they're more likely to be more efficient and more favorable.
[48:29] SPEAKER_02: And this is what FATF itself recommends.
[48:32] SPEAKER_01: So Tony,
[48:33] SPEAKER_01: given what you've said,
[48:33] SPEAKER_01: and by the way,
[48:34] SPEAKER_01: let me just clarify that I fully agree with you.
[48:36] SPEAKER_01: This is actually one of my submissions on this matter.
[48:39] SPEAKER_01: So how do we salvage the first shedding of this bill?
[48:42] Because if you throw it to the committee,
[48:44] as we did,
[48:44] they will tell you,
[48:45] go to the first shed.
[48:46] It's very clear,
[48:46] a virtual asset under 6CVK,
[48:48] a virtual exchange under CMA,
[48:49] et cetera,
[48:50] et cetera.
[48:50] Given where we are,
[48:52] it looks like this force has already vaulted,
[48:54] hasn't it,
[48:54] Tony?
[48:55] SPEAKER_02: No,
[48:56] I think the committee was actually adopted the idea of a joint
[49:00] virtual asset
[49:01] SPEAKER_02: regulatory authority.
[49:02] I think currently we're waiting for the third reading and the
[49:05] outcome of that
[49:06] SPEAKER_02: because then we'll have a very clear position.
[49:09] So I think the committee would have taken up a particular
[49:12] position and said we need
[49:13] SPEAKER_02: a virtual asset regulatory authority.
[49:16] But then also the initial technical working group would have
[49:19] taken another position.
[49:20] And so it's a question of seeing and hoping that they come to
[49:23] some kind of
[49:25] compromise and agreement and we're able to see third reading
[49:27] and things before but
[49:29] crucially we need to get moving on the implementation of the
[49:31] bill and we'll be
[49:32] getting back to that issue of the authority at the tail end of
[49:35] this conversation
[49:36] but let me take a question which has come here from at rk ruby
[49:39] asking why do we
[49:41] need a case denominated stable coin to build what how does it
[49:44] differ from mpesa and
[49:46] SPEAKER_01: maybe let me ask this question green asked here
[49:48] This country had a debate about two or three years ago around a
[49:52] central bank digital currency.
[49:54] SPEAKER_01: If that came into play, would it be sufficient enough to run it?
[49:59] There is the ongoing question of whether or not we need a
[50:02] Kenyan Shillings stablecoin.
[50:03] SPEAKER_02: My position is that we need many,
[50:05] SPEAKER_02: at least more than one issuer,
[50:07] SPEAKER_02: issuing a Kenyan Shillings stablecoin,
[50:09] SPEAKER_02: simply because if you look at the crypto ecosystem,
[50:13] and this is the simple point I made to Central Bank and to CMA
[50:18] at the beginning of
[50:19] SPEAKER_02: this year,
[50:19] SPEAKER_02: is we are licensing virtual asset service providers.
[50:22] SPEAKER_02: In what currency are they going to be holding Kenyan balances currently?
[50:26] SPEAKER_02: They'll hold it in Bitcoin.
[50:28] SPEAKER_02: They'll hold it in USDT.
[50:30] SPEAKER_02: They'll hold it in everything else except the Kenner shilling.
[50:32] And so we need the Kenner shilling stablecoin for us to
[50:35] enshrine a position for the
[50:37] SPEAKER_02: Kenner shilling inside of the crypto ecosystem.
[50:40] We also need a Kenner stablecoin to enshrine the position of
[50:45] things such as
[50:46] SPEAKER_02: anti-money laundering and counterterrorism financing.
[50:49] SPEAKER_02: So if you have flows going through a Kenner shilling stablecoin,
[50:52] SPEAKER_02: multiple,
[50:53] SPEAKER_02: then you have a very clear framework
[50:56] SPEAKER_02: that you could use to be able to do asset seizures.
[50:58] SPEAKER_02: If you don't have a stablecoin, let's say M-Pesa on chain.
[51:02] If the people at a bank steal money and they immediately want
[51:06] to send it to 20
[51:06] SPEAKER_02: exchanges,
[51:08] SPEAKER_02: you have to go to 20 exchanges.
[51:10] SPEAKER_02: FRC would have to go and contact 20 exchanges and request.
[51:13] SPEAKER_02: And who knows what time of the day it is,
[51:15] SPEAKER_02: wherever the request is being received,
[51:17] SPEAKER_02: before it actually comes.
[51:19] But if you have a Kenyan stablecoin,
[51:20] you could actually stop it immediately.
[51:22] And everybody has a very clear layer from an enforcement
[51:25] standpoint where you could
[51:26] SPEAKER_02: blacklist specific addresses on the Kenyan stablecoin issuers.
[51:31] SPEAKER_02: And you have a very easy way for you to be able to control flows.
[51:35] SPEAKER_02: Now,
[51:35] SPEAKER_02: beyond just the counterterrorism portion,
[51:38] SPEAKER_02: from a taxation standpoint,
[51:40] SPEAKER_02: if you have a Kenyan shillings stablecoin,
[51:42] SPEAKER_02: then we could fairly define taxable events.
[51:44] So taxable events,
[51:45] we're laying down the framework by having a KS table for
[51:48] individual taxes.
[51:50] Right now,
[51:50] we've only contemplated taxes on virtual asset service
[51:53] providers.
[51:54] SPEAKER_02: But if I make a thousand X on Bitcoin, should I pay taxes on it?
[51:59] SPEAKER_02: Maybe not.
[52:00] But if you're looking at other jurisdictions,
[52:02] they apply some form of tax.
[52:04] SPEAKER_02: And by the time KRA figures out how that tax is going to look like,
[52:07] SPEAKER_02: if you have a KS table,
[52:09] SPEAKER_02: then you have a layer that you could enforce taxable events.
[52:12] SPEAKER_02: Then now,
[52:12] SPEAKER_02: crucially,
[52:13] SPEAKER_02: if you're looking at,
[52:14] SPEAKER_02: from a trade standpoint,
[52:16] we could reduce dollar dependence by ensuring that we have
[52:21] currency pairs with
[52:22] SPEAKER_02: different jurisdictions.
[52:24] SPEAKER_02: So let's say you can create a Kenyan stablecoin,
[52:26] SPEAKER_02: Uganda creates a stablecoin,
[52:28] SPEAKER_02: Tanzania creates a stablecoin,
[52:29] SPEAKER_02: and so on and so forth.
[52:30] We could have currency pairs that exist on chain that enable
[52:34] and facilitate trade
[52:35] SPEAKER_02: without us using the US dollar.
[52:37] SPEAKER_02: Right now, Nigeria has the first Nigerian stablecoin.
[52:41] SPEAKER_02: If we have a Kenyan stablecoin,
[52:42] SPEAKER_02: we could do a dedicated pair between these two without necessarily aiding
[52:46] SPEAKER_02: governments or anything of that sort.
[52:48] SPEAKER_02: And a Nigerian businessman traveling to Kenya no longer needs U.S.
[52:52] SPEAKER_02: dollars to be able to power that particular trade.
[52:54] SPEAKER_02: So there's room for reduced USD dependence.
[52:57] SPEAKER_02: And instead of the framework of looking at this,
[53:00] SPEAKER_02: if we're able to do that for Kenya,
[53:02] SPEAKER_02: for Uganda,
[53:03] SPEAKER_02: and for Tanzania,
[53:05] SPEAKER_02: To combine,
[53:06] SPEAKER_02: they represent,
[53:06] I think they're like number five and number seven of our
[53:09] trading partners.
[53:10] SPEAKER_02: We're able to do that.
[53:11] SPEAKER_02: If you look at China specifically,
[53:13] SPEAKER_02: there's contemplation happening around a Hong Kong dollar stablecoin.
[53:16] SPEAKER_02: If we have a Kenyan stablecoin,
[53:18] we could have a dedicated pool between Kenya and Hong Kong that
[53:22] reduces USD
[53:23] SPEAKER_02: dependence.
[53:24] So Chinese businessmen would be able to accept the Hong Kong
[53:26] dollar stablecoin.
[53:28] And the Kenyan businessman would be able to accept a Kenyan
[53:31] shilling stablecoin.
[53:31] SPEAKER_02: But from a central bank standpoint, we've reduced U.S.
[53:34] SPEAKER_02: dollar dependence.
[53:35] SPEAKER_02: Because now,
[53:36] SPEAKER_02: if you could drive trade through that particular corridor,
[53:39] SPEAKER_02: we create brand new avenues.
[53:41] SPEAKER_02: So this is why the comparison of a stablecoin and M-Pesa is naive,
[53:45] SPEAKER_02: is because M-Pesa has a domestic use case.
[53:48] SPEAKER_02: If you have a stable coin that exists on publicly available blockchains,
[53:53] you become a global player instantly and we could drive trade
[53:55] in different ways.
[53:57] SPEAKER_02: Now, the question of the CBDC is very simple.
[54:00] SPEAKER_02: Imagine if M-BESA was a government project.
[54:02] SPEAKER_02: Where would it be today?
[54:03] SPEAKER_02: If you needed to go through approvals,
[54:06] if only people from certain tribes were the ones who are
[54:08] allowed to be employed
[54:09] SPEAKER_02: there,
[54:10] SPEAKER_02: If it was functioning a particular way,
[54:12] SPEAKER_02: like a proper government project,
[54:13] I don't think you would have seen the innovations out of the
[54:15] payment space that
[54:16] SPEAKER_02: currently exists.
[54:18] SPEAKER_02: And let's remember that the whole point of a central bank is policy.
[54:22] SPEAKER_02: Central banks are there to give policy.
[54:24] And so they basically create a regulatory framework for players
[54:27] to be able to function,
[54:29] SPEAKER_02: But overall,
[54:30] most CBDC projects in the world have actually failed simply
[54:34] because you're actually
[54:35] SPEAKER_02: unable to capitalize on the private interests.
[54:37] SPEAKER_02: And if the government focuses on providing a regulatory framework,
[54:41] it becomes very easy for you to be able to just support
[54:44] innovation and focus on
[54:45] SPEAKER_02: policy rather than having a central bank team looking at building payment
[54:50] integrations with PSPs or looking for liquidity pools with
[54:54] different stablecoins in
[54:55] SPEAKER_02: different regions.
[54:56] SPEAKER_02: Or like those things are not suited for a central bank.
[54:58] But if you have a private company and you're focusing on
[55:00] regulation,
[55:01] it becomes easy.
[55:02] SPEAKER_01: Thank you for that, Tony.
[55:03] SPEAKER_01: Let me just take a question which has come directly to my DM here.
[55:06] SPEAKER_01: Someone is asking,
[55:07] SPEAKER_01: when we talk about initial coin offerings,
[55:10] we're in a market where people even struggle to read the IM of
[55:14] IPOs in the equity
[55:15] SPEAKER_01: markets.
[55:16] What is being done to raise awareness around initial coin
[55:19] offerings and the
[55:20] SPEAKER_01: sophistication that comes with it?
[55:23] SPEAKER_01: Tony, as the chamber, are you doing any civic education on this?
[55:26] So the chamber,
[55:27] as much as we cast a tall shadow,
[55:29] the chamber is severely resource constrained.
[55:31] It's based off of our own personal contributions that we came
[55:34] together as an agency
[55:35] SPEAKER_02: to continue to further the position of virtual access.
[55:39] SPEAKER_02: But yes,
[55:40] there is a massive role in terms of educating the public that's
[55:43] required as the
[55:44] SPEAKER_02: ascent of this bill.
[55:45] SPEAKER_02: Now,
[55:46] there's very many people who are going to emerge and there's a
[55:48] massive need for
[55:50] civic education when it comes to providing a framework for
[55:54] people to understand how
[55:55] SPEAKER_02: to participate in virtual assets.
[55:58] And I think the over-indexing that usually happens is that we
[56:01] tend to look at crypto
[56:03] SPEAKER_02: simply from the speculative lens.
[56:05] SPEAKER_02: And we ask questions from that particular framework.
[56:07] But when we actually look at what this means from a investment
[56:12] standpoint,
[56:12] I think we'll see the merger of traditional finance and
[56:16] decentralized finance,
[56:17] SPEAKER_02: even inside of the Kenyan ecosystem.
[56:19] SPEAKER_02: Now,
[56:20] SPEAKER_02: from an investment standpoint,
[56:22] and what the wider movement that's happening inside of the
[56:24] crypto ecosystem is,
[56:25] SPEAKER_02: 44% of Wall Street is now invested in crypto.
[56:31] And about 10% of all portfolios have some form of crypto
[56:35] exposure inside of Wall Street.
[56:37] SPEAKER_02: How many funds in Kenya have crypto exposure, Julian?
[56:40] SPEAKER_02: I'd imagine few and fast-paced.
[56:42] SPEAKER_02: The answer is zero.
[56:43] So we have BlackRock,
[56:46] which is the largest hedge fund in the world,
[56:47] with 11 trillion US dollars.
[56:50] Just try and convert 11 trillion to Kenyan shillings for you to
[56:53] understand what
[56:54] SPEAKER_02: we're actually talking about.
[56:55] SPEAKER_02: So the largest hedge fund in the world decides,
[56:57] SPEAKER_02: you know what,
[56:57] SPEAKER_02: we're going to do a tokenized money market fund.
[56:59] We're going all in on crypto and we want to build different
[57:03] investment products.
[57:04] And so I foresee a future in which we will continue to see the
[57:09] lines being blurred
[57:10] between the traditional capital markets and virtual asset
[57:13] service providers who
[57:14] will emerge to provide the technological capability and
[57:17] capacity for these
[57:18] SPEAKER_02: traditional markets to be able to take part in that.
[57:21] SPEAKER_02: And because of that wider movement,
[57:23] SPEAKER_02: I also foresee that education will become a lot more mainstream.
[57:28] SPEAKER_02: In the same way,
[57:29] SPEAKER_02: we could talk about the Mansa Fund now from SIB,
[57:33] and most people know about it because there's information
[57:35] that's been put out,
[57:36] SPEAKER_02: there's education.
[57:38] I anticipate that we'll see a lot more of that coming out
[57:41] because whether or not we
[57:42] SPEAKER_02: have Avara or we have CMA directly,
[57:44] SPEAKER_02: CMA has standards for how investment advice is supposed to be given.
[57:48] SPEAKER_02: And so with that,
[57:50] we'll see the demise of these get-rich-quick Ponzi-like schemes
[57:55] that would have
[57:55] SPEAKER_02: characterized the crypto industry up until this point in time.
[57:58] And we'll see the emergence of more mature financial products
[58:02] that are tokenized.
[58:03] SPEAKER_02: And with it will come even greater education.
[58:05] SPEAKER_01: Thanks, Tony.
[58:06] SPEAKER_01: I have two questions here.
[58:07] One of them I think you've already touched on because at the
[58:08] tail end of your
[58:09] SPEAKER_01: comment,
[58:09] SPEAKER_01: you've spoken about scums.
[58:11] SPEAKER_01: So that is addressed.
[58:12] SPEAKER_01: But the first question is,
[58:13] SPEAKER_01: did you think the reluctance from regulators mainly stems from a lack of
[58:17] SPEAKER_01: understanding on how crypto works?
[58:19] SPEAKER_01: Have you tried to engage them?
[58:21] SPEAKER_01: And what has the response been so far?
[58:23] Maybe you can use your experience with the virtual assets field
[58:26] around this.
[58:27] SPEAKER_02: So every time you're talking to CMA, CBK,
[58:32] SPEAKER_02: FRC.
[58:33] SPEAKER_02: We've had wonderful conversations.
[58:35] And I really want to commend all of these teams because you
[58:39] have people who have
[58:40] really committed themselves to learning and understanding what
[58:45] virtual assets are.
[58:46] SPEAKER_02: So if you look at the initial bill,
[58:48] like it was so heartening for me seeing people who are much
[58:51] older than me,
[58:52] SPEAKER_02: but clearly have taken the time to learn the lingo,
[58:55] SPEAKER_02: to understand the tech,
[58:56] SPEAKER_02: to figure out how to create an environment that actually works.
[59:00] SPEAKER_02: And like, it's really great to see them engage.
[59:02] SPEAKER_02: And there's a lot of readiness that has happened.
[59:04] SPEAKER_02: On top of that, the central bank has done a lot of benchmarking.
[59:07] So I know that they went to Nigeria because I have a connection
[59:11] to the Nigerian
[59:11] SPEAKER_02: stable current people.
[59:12] SPEAKER_02: We've
[59:21] SPEAKER_02: how this virtual assets,
[59:23] SPEAKER_02: regulatory authority conversation goes,
[59:25] there is clear evidence on both parts from the central bank and
[59:29] from the CMA that
[59:31] SPEAKER_02: education has been happening.
[59:32] SPEAKER_02: They have upskilled themselves.
[59:34] So I don't think we're standing in a position where there's
[59:36] like a hesitation from their part.
[59:39] I think we just have the question of the final permutation of
[59:42] the bill and
[59:43] SPEAKER_02: whichever way that goes,
[59:45] SPEAKER_02: I have,
[59:45] I'm serving confidence that we have bureaucrats that have the
[59:49] sufficient knowledge
[59:50] SPEAKER_02: to be able to actually do this.
[59:52] The problem is the bureaucracy that might occur depending on
[59:55] whichever model that
[59:57] SPEAKER_02: is eventually settled upon.
[59:58] SPEAKER_02: And I think that is the wider challenge.
[1:00:00] SPEAKER_02: But from a technical personnel standpoint,
[1:00:03] I think we are seeing a lot more engagement from the regulators
[1:00:08] and even also the
[1:00:08] SPEAKER_02: legislators.
[1:00:09] So the Virtual Asset Chamber held a training for legislators
[1:00:12] and they're very eager
[1:00:13] SPEAKER_02: to learn more and engage more.
[1:00:14] But I think the reality is that the proof will be the pudding
[1:00:17] as you move towards
[1:00:18] SPEAKER_01: the implementation of the Act.
[1:00:20] SPEAKER_01: Thanks, Toli.
[1:00:21] SPEAKER_01: Let's cascade this towards a close and talk about part seven of the bill.
[1:00:25] SPEAKER_01: In the event of the breach of the provisions of this bill,
[1:00:28] SPEAKER_01: should it transition into an act,
[1:00:30] what sort of sanctions are we looking at and do you feel they
[1:00:33] are deterrent enough
[1:00:34] SPEAKER_01: as safeguards for the industry?
[1:00:36] SPEAKER_02: I'm sorry,
[1:00:37] SPEAKER_02: I don't have the actual figures in terms of what the sanctions are,
[1:00:40] SPEAKER_02: but it's a couple of million if you're found to be in violation of this.
[1:00:45] And I know various submissions were made in terms of what those
[1:00:49] penalties would
[1:00:50] SPEAKER_02: look like and how they were onerous from a cost standpoint.
[1:00:53] SPEAKER_02: And so a lot of people felt this is too much money.
[1:00:56] SPEAKER_02: I think it was like 10 million for want of my memory,
[1:00:59] where that was a penalty that was applied for contravention of
[1:01:03] any aspect of that
[1:01:04] SPEAKER_02: bill.
[1:01:04] SPEAKER_02: And I think to me personally,
[1:01:06] SPEAKER_02: I almost felt as though like my personal position,
[1:01:08] SPEAKER_02: so I'm not speaking on behalf of the chamber,
[1:01:11] SPEAKER_02: is that it should be 10 million,
[1:01:13] SPEAKER_02: but that should be the minimum amount.
[1:01:15] SPEAKER_02: But if you then end up getting away with more,
[1:01:18] SPEAKER_02: they should be even like go,
[1:01:20] it's 10 million or X percentage of the amount that you are
[1:01:24] alleged to have
[1:01:25] SPEAKER_02: defrauded people of.
[1:01:27] SPEAKER_02: You want to have very strong deterrence in this particular instance.
[1:01:30] And the balance there that has to be cast is how are we going
[1:01:33] to find a way in
[1:01:35] SPEAKER_02: which that we could actually not penalize people who are innovating,
[1:01:39] SPEAKER_02: but to create an environment for very common sense,
[1:01:42] SPEAKER_02: strong deterrence that needs to exist.
[1:01:44] SPEAKER_02: So there's room for that.
[1:01:46] SPEAKER_02: But forgive me, I'll probably try and get the figures.
[1:01:49] SPEAKER_02: And if you like those, maybe in a tweet after this.
[1:01:52] Actually,
[1:01:52] Tony,
[1:01:52] you are quite spot on because in the case of a company,
[1:01:54] it is 10 million.
[1:01:55] SPEAKER_01: In the case of an individual, it's 3 million.
[1:01:57] Only that I should give you a caveat is a fine not exceeding 3
[1:02:00] million shillings,
[1:02:01] SPEAKER_01: or in the case of a company,
[1:02:02] SPEAKER_01: a fine not exceeding 10 million shillings.
[1:02:04] SPEAKER_01: So,
[1:02:05] SPEAKER_01: of course,
[1:02:05] we wait for this to go through the motions of the house and see
[1:02:08] what the outcome
[1:02:09] SPEAKER_01: will be when all is done.
[1:02:11] SPEAKER_01: Tony,
[1:02:11] SPEAKER_01: let's talk a little bit about the virtual assets regulatory authority,
[1:02:15] which you touched on as we were speaking about the regulatory
[1:02:17] environment.
[1:02:18] Sections of the industry have raised concern about its
[1:02:21] architecture and the fact
[1:02:23] that the chamber is actually included in the virtual regulatory
[1:02:27] authority.
[1:02:28] And the concern here is that the playing field will not be
[1:02:30] leveled as it should be required.
[1:02:32] SPEAKER_01: How do you respond to that one?
[1:02:34] This has been an area of concerted attack for the chamber,
[1:02:38] which was largely needless.
[1:02:40] SPEAKER_02: The chamber did not advocate for this position at any point in time.
[1:02:43] SPEAKER_02: We did not lobby for this.
[1:02:45] SPEAKER_02: We didn't ask for it.
[1:02:46] We've not been in a position where we've been saying we want a
[1:02:49] seat at the table or
[1:02:50] SPEAKER_02: anything of that sort.
[1:02:51] SPEAKER_02: But the Finance and National Planning Committee,
[1:02:54] SPEAKER_02: of their own volition,
[1:02:55] thought it wise to include us as one of the nominating members
[1:03:00] for the position of
[1:03:01] SPEAKER_02: a board.
[1:03:02] Now,
[1:03:03] for whatever reasons,
[1:03:04] the industry has felt a particular way about that.
[1:03:07] SPEAKER_02: But let me start by giving just a brief history of the chamber.
[1:03:10] SPEAKER_02: The chamber would have started off advocacy work.
[1:03:12] SPEAKER_02: So currently,
[1:03:13] the wider ecosystem is that if we are to apply a definition in
[1:03:17] terms of what a
[1:03:18] SPEAKER_02: virtual asset startup in Kenya looks like,
[1:03:21] let me use an arbitrary definition and say that you've been
[1:03:24] able to raise venture
[1:03:25] SPEAKER_02: capital or you earn more than 5 million Kenya shillings a month,
[1:03:29] SPEAKER_02: something of that sort.
[1:03:30] SPEAKER_02: If we were to apply that particular definition,
[1:03:32] the number of virtual asset service providers in Kenya would be
[1:03:36] about 10 to begin
[1:03:37] SPEAKER_02: with,
[1:03:37] SPEAKER_02: maybe 15.
[1:03:38] So we're talking about a very small number of virtual asset
[1:03:41] service providers.
[1:03:42] SPEAKER_02: And again,
[1:03:44] I'll go back to my very basic definition that you've either
[1:03:47] raised venture capital
[1:03:48] SPEAKER_02: or you earn more than 5 million a month or even 2 million,
[1:03:51] SPEAKER_02: fine,
[1:03:51] SPEAKER_02: whatever it is.
[1:03:52] SPEAKER_02: That number is actually really small.
[1:03:54] So if you're looking at about 10 qualifying startups or 15
[1:03:58] qualifying startups,
[1:04:00] SPEAKER_02: the question is,
[1:04:00] SPEAKER_02: how are they going to be represented?
[1:04:02] SPEAKER_02: How do you mobilize as an industry?
[1:04:05] SPEAKER_02: Because if you're looking at FinTech, that number is huge.
[1:04:07] SPEAKER_02: You can't even name it.
[1:04:08] SPEAKER_02: But in terms of virtual assets, that number is actually really small.
[1:04:12] SPEAKER_02: So the chamber would have begun its work.
[1:04:14] SPEAKER_02: Previously, there was an association that is now dormant.
[1:04:18] So there was a gap in terms of a lobby vehicle and an entity
[1:04:22] that we could use for lobbying.
[1:04:24] SPEAKER_02: So the chamber stepped in.
[1:04:26] We started doing sector-wide discussions on TV and via Twitter
[1:04:29] spaces in April of 2023.
[1:04:32] SPEAKER_02: We delivered submissions before Parliament in May 25th to 2023,
[1:04:35] and that's when we began developing a relationship with the
[1:04:38] Finance and National
[1:04:39] SPEAKER_02: Planning Committee.
[1:04:40] SPEAKER_02: In September 23,
[1:04:41] we filed a constitutional petition challenging the
[1:04:44] implementation of the digital
[1:04:45] SPEAKER_02: asset tax.
[1:04:46] SPEAKER_02: Throughout October 23 to this year,
[1:04:49] SPEAKER_02: we maintained a lot of different engagements with members of Parliament.
[1:04:52] Through we submitted formal memoranda,
[1:04:54] we did public awareness campaigns around legislation.
[1:04:58] SPEAKER_02: In 31st October 2023,
[1:04:59] the lawmakers tasked one of our directors to come up with a
[1:05:03] draft of a crypto bill.
[1:05:05] SPEAKER_02: In 9th December 2023,
[1:05:07] we had legislative consultations with members of parliament
[1:05:10] that we actually
[1:05:11] SPEAKER_02: presented the first private virtual asset bill,
[1:05:14] SPEAKER_02: which did not go anywhere.
[1:05:15] SPEAKER_02: Then in February 2024,
[1:05:17] we hosted a policy workshop and we've been engaging government
[1:05:20] and the national
[1:05:21] SPEAKER_02: committee for a number of years.
[1:05:23] SPEAKER_02: In October last year,
[1:05:25] SPEAKER_02: we held a joint forum with Nick Sonomondi from KRA,
[1:05:28] where we had the digital asset tax round table that we
[1:05:31] essentially hosted.
[1:05:31] So we have a long history of being able to engage with
[1:05:34] different sectors of government.
[1:05:36] So when the committee met and they were considering the setting
[1:05:39] up of the Virtual
[1:05:39] SPEAKER_02: Asset Regulatory Authority,
[1:05:41] they chose the chamber to be one of the nominating members
[1:05:44] because inside of the
[1:05:45] SPEAKER_02: composition of the particular board,
[1:05:47] SPEAKER_02: there was no technical voice of the industry.
[1:05:50] SPEAKER_02: Now,
[1:05:51] SPEAKER_02: this has been met with a lot of suspicion,
[1:05:53] SPEAKER_02: a lot of questions and all of these things,
[1:05:56] to the point that we've made it clear that we are no longer
[1:05:58] interested in having
[1:05:59] SPEAKER_02: that particular board position.
[1:06:01] SPEAKER_02: And if the industry cannot come together,
[1:06:03] SPEAKER_02: and if the industry does not want to coalesce around a single board seat,
[1:06:08] SPEAKER_02: then let the industry figure out how they will be able to get that.
[1:06:11] SPEAKER_02: The focus of the chamber remains that we want to be a policy think tank.
[1:06:15] SPEAKER_02: We want to have engagements in different countries.
[1:06:18] SPEAKER_02: We're looking at launching in Mexico.
[1:06:19] SPEAKER_02: We're looking at launching in Trinidad.
[1:06:21] SPEAKER_02: We're looking at continuing public engagement in Rwanda, in Ethiopia.
[1:06:26] And so we've done our part and we leave it now to the industry
[1:06:29] to be able to decide
[1:06:30] SPEAKER_01: exactly what it wants to do.
[1:06:32] SPEAKER_01: Thank you for that, Tony.
[1:06:33] SPEAKER_01: And as we wrap up our conversation,
[1:06:35] SPEAKER_01: there's a question here,
[1:06:36] SPEAKER_01: which,
[1:06:36] SPEAKER_01: and when I remember reading the bill,
[1:06:37] SPEAKER_01: there was this provision,
[1:06:39] SPEAKER_01: given the volumes of data that practitioners,
[1:06:41] SPEAKER_01: your space are handling,
[1:06:42] how do you navigate this protection as much is a concern for
[1:06:46] many Kenyans?
[1:06:47] SPEAKER_02: Right.
[1:06:47] SPEAKER_02: So from a data protection standpoint,
[1:06:49] SPEAKER_02: the virtual access service provider bill does not in any way,
[1:06:52] SPEAKER_02: shape or form supersede the Data Protection Act.
[1:06:56] And so we would still be required to do the same levels of
[1:07:00] reporting and record
[1:07:02] keeping that any other financial services provider would be
[1:07:05] required to do.
[1:07:06] SPEAKER_02: Crucially,
[1:07:07] there's been no specific or other explicit requirements that
[1:07:10] have been made,
[1:07:11] SPEAKER_02: and I sound to be corrected,
[1:07:12] SPEAKER_02: but in terms of what that,
[1:07:13] SPEAKER_02: from a data protection standpoint,
[1:07:15] SPEAKER_02: that are required specifically of virtual asset startups.
[1:07:19] SPEAKER_02: But I think in subsequent legislation,
[1:07:21] when you're looking at aspects of anti-money laundering and
[1:07:24] counterterrorism
[1:07:24] SPEAKER_02: financing and so on and so forth,
[1:07:26] all of those things would then be covered inside of whatever
[1:07:28] the Data Protection
[1:07:30] SPEAKER_02: Act provides for the proper functioning of a financial service provider.
[1:07:34] One of the biggest surprises we saw in Refinance Act 2025 was
[1:07:39] the repealing of
[1:07:40] SPEAKER_01: digital assets tax.
[1:07:42] SPEAKER_01: Granted, there's now excess duty at 10% on the transaction fees.
[1:07:46] SPEAKER_01: But I'm curious,
[1:07:47] how did the industry receive this adjustment considering how
[1:07:50] much of a surprise
[1:07:51] SPEAKER_01: wildcard it was?
[1:07:52] SPEAKER_02: That was a very welcome addition.
[1:07:54] The Chamber has a long history of engaging with the Kennedy
[1:07:59] Revenue Authority and
[1:08:00] SPEAKER_02: various aspects of the bill,
[1:08:02] SPEAKER_02: of the Finance and National Planning Committee.
[1:08:05] And so just like everybody else,
[1:08:06] we made our case in terms of what that needs to look like.
[1:08:09] So if you look at the structures,
[1:08:11] just for the sake of everybody else,
[1:08:12] as we ramp up,
[1:08:13] SPEAKER_02: is that there was a 3% digital asset tax on gross transactional volume.
[1:08:18] And what that means is if you send money from one SafariCom
[1:08:22] number to another
[1:08:22] SPEAKER_02: SafariCom number,
[1:08:23] SPEAKER_02: you'd pay 3%,
[1:08:24] SPEAKER_02: even if it's yours.
[1:08:25] SPEAKER_02: So it was gross transactional volume.
[1:08:28] So if I'm sending 10,000 shillings to myself,
[1:08:30] then 300 shillings of that would be paid.
[1:08:33] SPEAKER_02: If I send it back, like from my bank account to my phone, 300 shillings.
[1:08:37] SPEAKER_02: If I send it again, 300 shillings.
[1:08:39] SPEAKER_02: So that was the structure of what the bill had actually contemplated.
[1:08:42] SPEAKER_02: So when you engage with legislators,
[1:08:44] SPEAKER_02: and this is part of the submission that we made,
[1:08:46] SPEAKER_02: is that,
[1:08:46] SPEAKER_02: and even Bowman's actually made this particular submission,
[1:08:49] SPEAKER_02: was that it was very clear that it was untenable,
[1:08:52] SPEAKER_02: right?
[1:08:52] SPEAKER_02: It was very clear that it was untenable.
[1:08:55] SPEAKER_02: And because of that,
[1:08:57] I think the Finance and National Planning Committee took the
[1:09:00] decision to repeal the
[1:09:01] SPEAKER_02: digital asset tax and replace that with a 10% excise duty,
[1:09:05] SPEAKER_02: because that is actually in line with even how banks are charged.
[1:09:08] SPEAKER_02: So banks, I think, pay 15%.
[1:09:11] SPEAKER_02: And our virtual asset service providers are going to pay 10.
[1:09:14] SPEAKER_02: And hopefully it stays that way, but who knows.
[1:09:17] SPEAKER_02: But I think for us, it makes a lot more sense.
[1:09:19] Because imagine if banks were required to pay a tax of 3% on
[1:09:25] gross transfers.
[1:09:26] SPEAKER_02: It just would not make any sense.
[1:09:27] SPEAKER_01: My only wonder is why it took 21 months for Alamo to realize this,
[1:09:30] SPEAKER_01: because this is something I told them right from the get-go.
[1:09:32] SPEAKER_01: But anyway, a conversation for another.
[1:09:34] SPEAKER_01: Tony, please give us your parting shot.
[1:09:36] I guess for me,
[1:09:36] the party shot is just like,
[1:09:38] this is a really great bill.
[1:09:40] SPEAKER_02: Kedai is standing at a very important crossroads for us.
[1:09:44] SPEAKER_02: And we're looking at a brand new day for Kenyan innovators.
[1:09:47] SPEAKER_02: And I'm looking forward to seeing how this will pan out.
[1:09:50] SPEAKER_02: Thank you so much to everybody who facilitated this.
[1:09:53] SPEAKER_02: Thank you to the Bunker Capital team.
[1:09:55] SPEAKER_02: Thank you to my neighbor, Jirani, from a very long time ago.
[1:09:59] SPEAKER_02: Julian's for having me as well and being an excellent host.
[1:10:02] SPEAKER_01: Thank you very much, everybody, for being part of this conversation.
[1:10:04] SPEAKER_01: We have been talking about the National Assembly Bill number 15 of 2025.
[1:10:08] That's the virtual asset service providers bill running from
[1:10:11] part one all the way to part eight.
[1:10:13] SPEAKER_01: The rest of the parts are largely miscellaneous.
[1:10:15] SPEAKER_01: So that's why we left them out.
[1:10:16] SPEAKER_01: Clearly,
[1:10:16] they're having a deep dive into the definitions because of how
[1:10:19] critical they are
[1:10:20] SPEAKER_01: and the sanctions as well.
[1:10:21] SPEAKER_01: Thank you so much.

Shows are listed from Apple Podcasts' charts and directory, and Podcast Index where it is used. Every show and episode belongs to its publisher and plays from the publisher's own feed; this site hosts none of them.