Cryptocurrencies effects on monetary sovereignty: Advancing a Case for their regulation

Abstract

Cryptocurrencies are a form of virtual currencies that are enabled by cryptography and is supported by a technology known as Blockchain. The first form of cryptocurrency, the Bitcoin was introduced in the year 2008 by the bitcoin ‘white paper’ by Satoshi Nakamoto. This type of currency gained popularity because it was not issued or regulated by an intermediary. All transactions were peer to peer. Also, the fact that the transactions are anonymous. However, the reception of cryptocurrencies has been variant from jurisdiction to jurisdiction ranging from bans to tailoring the current laws to regulate these currencies like the United States America to issuing warnings against the use and trade of cryptocurrencies. For instance, the Central Bank of Kenya issued a warning stating that the customers of these virtual currencies should be aware of the fact that these currencies are not regulated, they are attractive to criminals who have the intention to use it for money laundering and they are volatile, in that their value often fluctuates. In addition to this, there is a risk on the monetary sovereignty especially with the rise of stablecoins such as Libra. This study shall therefore analyse the risks posed by Cryptocurrencies and suggest a legal framework for its regulation in Kenya.