IMF Urges Kenya to Implement Crypto Travel Rule to Combat Money Laundering

The International Monetary Fund (IMF) is urging Kenya to implement the Travel Rule, an international anti-money laundering standard developed by the Financial Action Task Force (FATF). This rule requires virtual asset service providers to collect, verify, and share identifying information about the sender and receiver of cryptocurrency transfers. The IMF wants Kenya to compel cryptocurrency firms to share customer identification data, such as names, addresses, and national ID numbers, with the government to prevent money laundering.

The Travel Rule is aimed at preventing the anonymous transfer of cryptocurrencies, which can be used for illicit activities such as money laundering and terrorist financing. The IMF notes that Kenya has been in FATF's 'grey list' of countries under special scrutiny since February 2024 due to loopholes in countering money laundering and terrorism financing. The multilateral lender says that a significant gap exists regarding FATF requirements for the exchange of information with crypto asset transfers.

The IMF recommends that Kenya enact laws that will create a legal obligation for crypto-asset service providers (CASPs) to take adequate measures to obtain, hold, and transmit required originator and beneficiary information immediately and securely when conducting digital asset transfers. This information includes customers' full names, account references, physical addresses or national ID numbers, as well as the wallet addresses involved in virtual asset transfers.

The implementation of the Travel Rule will enable CASPs to carry out effective sanctions screening and detect suspicious transactions, which should be reported to the Financial Reporting Centre (FRC), Kenya's financial intelligence unit. The IMF reckons that the lack of a requirement for crypto firms to exchange customer information when processing transfers weakens crime prevention and leaves gaps in the identification of suspicious transactions.

Kenya's crypto activity is dominated by stablecoins, with bitcoin accounting for just 2.0 percent of transactions. According to Chainalysis, a New York-based blockchain data platform, Kenyans use cryptocurrencies, particularly stablecoins, mainly to pay for goods and services, especially across borders, send remittances, and hedge against depreciation of the shilling. Kenyans wired a record Sh740 billion ($5.7 billion) worth of cryptocurrencies in the year to June 2026.

The Kenya Revenue Authority (KRA) has sought to crack down on cheats exploiting the anonymity offered by crypto exchanges to evade taxes. The government has introduced a digital asset tax, which is deducted by exchanges from traders at a rate of three percent and remitted to the KRA. Now, crypto exchanges will additionally be expected to undertake customer identification, identify beneficial owners, and track all transactions, ending the anonymity that has been the hallmark of crypto trading.

The IMF wants the requirements incorporated into the recently published Virtual Asset Service Providers (VASP) Regulations or another appropriate legal instrument without delay. The implementation of the Travel Rule is expected to enhance Kenya's ability to prevent money laundering and terrorist financing, and ultimately remove the country from FATF's 'grey list'.

Key points

• The IMF urges Kenya to implement the Travel Rule to combat money laundering and terrorist financing.
• Kenya's crypto activity is dominated by stablecoins, with bitcoin accounting for just 2.0 percent of transactions.
• The implementation of the Travel Rule will enable CASPs to carry out effective sanctions screening and detect suspicious transactions.