What Happens When Central Banks Push Back?
A deep dive into regulation, resistance, and the future of digital money in Kenya
1. Why Central Banks Are Wary of Crypto
Central banks exist to maintain monetary stability, control inflation, and regulate payment systems. Cryptocurrencies challenge that by:
- Operating outside government control
- Enabling peer-to-peer transactions without banks
- Introducing volatile, unregulated assets into the economy
- Threatening capital controls and monetary policy tools
For the CBK, crypto raises concerns about:
- Financial stability
- Consumer protection
- Money laundering and terrorism financing
- Loss of monetary sovereignty
2. CBK’s Historical Stance on Crypto
Since 2015, the CBK has issued multiple warnings:
- Instructed banks not to deal with crypto firms
- Warned the public that crypto is unregulated and risky
- Blocked crypto startups from accessing banking services
- Reiterated in 2022 and 2023 that its position was “unchanged”
Despite this, Kenya became a top global market for peer-to-peer (P2P) crypto trading, driven by youth, freelancers, and small traders1.
3. The Shift in 2024–2025: From Resistance to Regulation
In late 2024, the CBK joined other regulators (CMA, SASRA, IRA, RBA) in forming a Technical Working Group to draft crypto regulations. This marked a major shift:
- Acknowledging that crypto adoption is too big to ignore
- Recognizing the need for consumer protection and oversight
- Exploring how to integrate crypto into Kenya’s financial system
The CBK also released a Discussion Paper on Central Bank Digital Currency (CBDC), inviting public input on whether Kenya should issue its own digital shilling.
4. What Happens When Central Banks Push Back?
When central banks resist crypto, several things happen:
a) Users Go Underground
- P2P platforms like Binance and Paxful thrive
- Users bypass banks using M-PESA and stablecoins
- Crypto adoption continues—but without safeguards
b) Innovation Moves Elsewhere
- Startups relocate to crypto-friendly jurisdictions
- Kenya risks losing out on fintech investment and jobs
c) Regulation Becomes Reactive
- Scams and collapses (like FTX) force regulators to act
- Laws are rushed, unclear, or overly restrictive
d) Trust Erodes
- Citizens lose faith in financial institutions
- Crypto becomes a protest tool against inflation and exclusion
5. What the CBK Is Doing Now
As of 2025, the CBK is:
- Supporting the Virtual Asset Service Providers (VASP) Bill, which will license exchanges, wallets, and token issuers
- Exploring a CBDC to offer a state-backed alternative to crypto
- Collaborating with the Capital Markets Authority (CMA) to regulate crypto as an investment asset
- Engaging in public consultations to shape policy2
This signals a shift from outright rejection to measured integration.
6. What This Means for You
| If You’re a… | What to Expect |
|---|---|
| Crypto User | More legal clarity, but stricter KYC and tax rules |
| Startup Founder | Need for licensing, local office, and compliance |
| Bank or SACCO | May be allowed to offer crypto services under CBK oversight |
| Investor | Safer platforms, but fewer “wild west” opportunities |
| Freelancer | Easier to declare crypto income and access financial services |
Final Word
The CBK’s pushback against crypto was never about fear—it was about control, stability, and responsibility. But in 2025, the conversation is shifting. Kenya is moving from resistance to regulation, and the future of crypto will depend on how well central banks, innovators, and users can meet in the middle.
