Kenyan Crypto Startups Fear Binance Influence in VASP Bill

Kenyan crypto startups have raised concerns over the proposed Virtual Asset Service Provider (VASP) bill, which they fear could grant excessive power to a lobby group linked to Binance. This group, known as the Virtual Asset Consultative Forum (VAC), is seen as potentially influencing regulations in a manner that could favor Binance, leading to unfair competition and regulatory capture. The VASP bill aims to establish a regulatory framework for virtual asset service providers in Kenya, but the involvement of a Binance-linked entity has raised alarms among local crypto startups. They worry that this could create an uneven playing field, where Binance, with its significant resources and influence, could dominate the market at the expense of smaller, local competitors. The concerns revolve around the potential for Binance to use its connections to shape regulations that benefit its own interests, thereby stifling innovation and competition in the Kenyan crypto market. This situation highlights the broader challenge of balancing regulatory oversight with the need to foster a competitive and innovative crypto ecosystem. The Kenyan government will need to carefully navigate these issues to ensure that the VASP bill achieves its intended goals without inadvertently creating a monopoly.

According to disclosures, the VAC will be included on the regulatory board established under the draft law. Some crypto stakeholders in Kenya claim that VAC has run Binance-sponsored regulatory talks, lacks independence and acts as a proxy for the exchange. One stakeholder questioned the fairness and constitutionality of VAC's inclusion, given its ties to Binance. The report claimed that Binance pays VAC $6,000 per country each month for policy advocacy, citing a confidential agreement. This raises fears that the lobby group could skew Kenya’s crypto rules to benefit Binance and sideline local players. Critics also noted similarities with VAC’s reported attempts to insert itself into Rwanda’s regulatory process. Another stakeholder warned that if an entity with a clear conflict of interest becomes the crypto regulator, Kenya may never leave the FATF and EU greylists.

In response to these concerns, VAC’s director Basil Ogolla defended VAC’s role, pointing out its two-year campaign of consultations with the International Monetary Fund (IMF), Central Bank of Kenya (CBK), and Parliament. Ogolla stated that the National Assembly’s decision to include VAC as a nominator in the regulatory board reflects the trust and confidence built through this track record of meaningful engagement. Notably, the new regulatory body in Kenya will also include representatives from the National Treasury, the Central Bank of Kenya (CBK), and the Capital Markets Authority (CMA), along with a lawyer and an accountant. However, the involvement of VAC, with its alleged ties to Binance, continues to be a contentious issue.

This situation in Kenya is not an isolated incident. Binance has been deepening its ties with governments globally. In May, Binance signed a memorandum of understanding (MOU) with Kyrgyzstan’s National Agency for Investments to introduce crypto payment infrastructure and blockchain education in the country. In an interview, CEO Richard Teng revealed that Binance is actively advising several governments on building strategic Bitcoin reserves and crafting crypto policies. Teng mentioned that Binance has received approaches from a few governments and sovereign wealth funds on the establishment of their own crypto reserves. Earlier, former CEO Changpeng Zhao was named an adviser to Pakistan’s newly launched Crypto Council, which will oversee the country’s blockchain and digital asset initiatives. These developments underscore Binance's growing influence in the global crypto regulatory landscape, raising questions about the potential for regulatory capture and the need for transparent and fair regulatory frameworks.