Kenya Tightens Grip on Stablecoins Amid Dollarization Fears

Africa is rapidly advancing its relationship with crypto-backed currencies, leading to the need for regulation. Kenya has responded by publishing Virtual Asset Service Providers (VASP) regulations, which grant the central bank significant autonomy over digital currency transactions.

The new rules give the central bank the authority to direct licensed intermediaries to restrict access on foreign-issued stablecoins such as USDT and USDC. Stablecoins must be approved by the central bank and issued by a licensed stablecoin issuer before they can be listed on regulated local exchanges.

Pankaj Bengani, former executive at Jack Dorsey's Block and co-founder of global stablecoin and digital asset network Meld, applauds Kenya for moving stablecoins into a regulated framework. However, he warns that controlling the channels of dollar-backed stablecoins could lead to market isolation.