NAIROBI — The International Monetary Fund (IMF) has urged Kenya to strengthen oversight of cryptocurrency transactions by implementing the Financial Action Task Force (FATF) Travel Rule, saying the measure is critical to the country's efforts to exit the global anti-money laundering grey list by April 2027.

The recommendation comes as Kenya's digital asset market continues to expand rapidly, with cryptocurrency transactions reaching an estimated KSh740 billion (about $5.7 billion) in the 12 months to June 2026, according to data cited by the IMF. The growth has cemented Kenya's position as Africa's third-largest cryptocurrency market, behind Nigeria and South Africa.

While Kenya introduced a licensing and registration framework for Virtual Asset Service Providers (VASPs) in 2025, the IMF says additional measures are needed to improve transparency and strengthen oversight of cross-border digital asset transactions.

At the centre of the recommendations is the FATF Travel Rule, an international anti-money laundering standard that requires cryptocurrency exchanges and other virtual asset service providers to collect and share identifying information about both the sender and recipient of qualifying digital asset transfers.

Under the rule, service providers would be required to transmit details such as the names of both parties, wallet or account identifiers and other customer information before or during the execution of a transaction. The receiving institution would then verify the information and screen it against sanctions and anti-money laundering databases.

Supporters of the measure say it helps authorities trace illicit financial flows, combat terrorist financing, reduce sanctions evasion and detect suspicious transactions involving digital assets.

Kenya was placed on the FATF grey list in February 2024 after the global anti-money laundering watchdog identified weaknesses in the country's framework for combating money laundering and terrorist financing. Since then, the government has been implementing an action plan to address the deficiencies.

According to the Financial Reporting Centre (FRC), Kenya has completed 19 of the 21 action items required under the FATF action plan. However, enhanced supervision of virtual asset service providers remains one of the key outstanding requirements before the country can be considered for removal from the grey list.

The IMF has warned that failure to fully implement the remaining reforms could delay Kenya's planned exit from the list at the FATF plenary scheduled for April 2027.

Grey listing does not result in economic sanctions but can increase scrutiny of financial transactions involving Kenyan institutions, raise compliance costs for banks and businesses, and discourage foreign investment by increasing perceived financial risk.

The proposed rules have sparked debate within Kenya's growing cryptocurrency industry.

Banks, financial investigators and regulated fintech firms have largely welcomed stronger oversight, arguing that greater transparency would help curb fraud, money laundering, ransomware payments and cryptocurrency investment scams.

However, some blockchain developers, cryptocurrency traders and digital privacy advocates have expressed concerns that mandatory sharing of customer information could undermine user privacy, expose sensitive personal data to cyber risks and push more users toward decentralized platforms and self-custody wallets that operate outside regulated exchanges.

As the National Treasury and the Central Bank of Kenya prepare amendments to the country's anti-money laundering framework, policymakers face the challenge of balancing international compliance requirements with the need to support innovation in one of Africa's fastest-growing digital asset markets.