Have you ever imagined paying for your online shopping or international purchases using systems running on digital asset rails? Probably not. But just a few years ago, few imagined that mobile money would define everyday transactions.
Today, the reality of digital money payment systems is dawning on us, and regulation is a crucial step in ensuring its smooth adoption.
Payment systems have been continuously evolving to facilitate a more convenient exchange of goods and services. The history of payment systems dates back to barter trade, followed by introduction of commodity money.
Today, while fiat currencies dominate, we are witnessing an increasing rate in the use of digital currencies globally. Digital currencies exist in electronic form and are accessible through computers or mobile phones.
These forms of currencies include cryptocurrencies and stablecoins. While cryptocurrencies such as Bitcoin remain highly volatile, stablecoins seek to mitigate this challenge by linking their value to stable assets, such as the US dollar, making them a viable alternative for payments and cross-border transactions.
At the forefront of discussions around stablecoins is Yellow Card, the largest and first licensed Pan-Africa stablecoin-based infrastructure provider, operating in 20 countries across the continent.
With Crypto Asset Service Provider (CASP) licenses in South Africa and Botswana as well as CASP registration in the EU (Poland). In addition, the company is consistently engaging with regulators and participating in sandboxes to ensure compliance and foster innovation.
As digital currencies gain traction, governments worldwide are taking notice and have seen the future benefits. China became the first major economy to introduce a Central Bank Digital Currency (CBDC) with its Digital Yuan or e-CNY, which began pilot testing in 2020.
In Africa, there is indeed a growing appetite for CBDCs. Many African central banks are exploring CBDCs as a way to enhance payment system efficiency, promote financial inclusion, and improve monetary policy.
Notably, Nigeria was the second country in the world, after the Bahamas, and first in Africa to roll out a CBDC. The eNaira has been piloted and is aimed at enhancing financial inclusion and reducing transaction costs. Ghana has piloted its own CBDC, the eCedi while South Africa also pilots for its CBDC.
Focusing on Kenya, regulation of digital assets has gained the attention of key dockets. The National Treasury in January 2025 published the first draft of the National policy on Virtual Assets and Virtual Assets Service Providers and the draft Bill on Virtual Assets and Virtual Asset Service Providers that has already undergone the public participation process.
The National Treasury projected that the government will budget about Sh 1.82 billion for the implementation of a draft policy on digital assets such as crypto. The policy is aimed at regulating the market and preventing potential risks of money laundering and tax evasion.
While the path to digital assets adoption is still at its infancy, ongoing policy discussions and introduction of regulatory frameworks will pave the way for a secure and efficient digital assets ecosystem.
According to a 2024 regional survey by the International Monetary Fund (IMF), Central banks are at varying stages of CBDC design and development.
While this is ongoing, the report shows that sub-Saharan Africa faces multiple challenges in the development and implementation of CBDCs. These include limitations in human capital resources and physical infrastructure as well as cybersecurity risks.
Trust, reputational risks, and bank disintermediation are also areas of concern, elevating the need for clear policy guidelines for transactions involving digital currencies.
Regulation is essential for the widespread adoption of digital assets, particularly in business-to-business (B2B) transactions. By providing legal clarity, reducing fraud, and ensuring compliance, businesses will gain confidence in using digital currencies for payments and settlements.
Something key in the draft Kenya Virtual Assets Bill is that it provides for on-ramp and off-ramp payment service providers using digital assets.
This is also the case with the draft law in Rwanda on Virtual Assets Business that was published on 3rd March 2025 by the Capital Markets Authority and provides for entities offering on-ramp and off-ramp services for the conversion between virtual assets and fiat currency; and facilitating cross-border funds transfers using virtual assets via distributed ledger technology.
This expands cross boarder payments and acknowledges that digital assets especially stablecoins have a key role to play in the payment's ecosystem.
As the fintech sector expands, policymakers face increasing pressure to establish clear legal frameworks to ensure innovation and inclusivity. Clarity in regulation will enhance efficiency, reduce costs, and improve transparency in financial transactions.
Yellow Card’s Widget and Payments API play a key role in this process by offering seamless integration for businesses, allowing them to easily adopt and implement digital currency solutions while staying compliant with regulatory standards.
By embracing regulation, Kenya will unlock the full potential of digital assets, fostering both financial freedom and efficiencies in payment systems for both individuals and businesses.
