Kenyan Banks Set Eyes Cryptocurrencies to Reduce Transaction Costs

• The Central Bank of Kenya’s 2024 Innovation Survey revealed that banks see virtual assets as a means to expand access and cut transaction costs
• Banks remain cautious due to risks including Anti-Money Laundering (AML) compliance issues, cyber threats, fraud, and the high volatility of cryptocurrencies
• Derrick Bundi, co-founder and CEO of Pretium, told TUKO.co.ke that cryptocurrencies are a game-changer for many who are involved in cross-border transactions

Elijah Ntongai, a journalist at TUKO.co.ke, has over four years of financial, business, and technology research and reporting experience, providing insights into Kenyan and global trends.

Kenyan banks are increasingly exploring the use of cryptocurrencies and virtual asset technologies.

The Innovation Survey by the Central Bank of Kenya (CBK) revealed a growing interest among commercial banks in leveraging virtual assets (VAs) such as cryptocurrencies and stablecoins to enhance transaction speed, lower cross-border payment costs, and provide alternative investment channels.

"Financial institutions indicated their interest in virtual assets, noting the potential opportunities of virtual assets in enhancing financial access to the unbanked by providing alternative payment and investment channels, improving transaction speed, and reducing transaction costs," CBK reported.

Speaking to TUKO.co.ke, Derrick Bundi, the co-founder and CEO of Pretium, a Kenya company enabling the use of stablecoins in Africa, said cryptocurrencies are a game changer for millions who rely on remittances and cross-border trade, making transactions faster and cheaper.

"When it comes to cross-border payments, existing methods can take several days to settle and high fees as high as 10% depending on the countries involved. This is because banks rely on multiple intermediaries to routes funds from one country to another. In contrast, crypto enables near instant settlement, at a cost as low as $0.01," Bundi said.

The CBK noted that banks are preparing for a regulated virtual asset environment, following the finalisation of the National Policy on Virtual Assets and Virtual Asset Service Providers (VASPs) in March 2025.

Risks in cryptocurrency

The upcoming VASPs bill is expected to lay the groundwork for operationalising these technologies safely. However, banks are still warry of multiple risks.

According to the survey, banks highlighted several risks associated with virtual assets, including difficulties in complying with Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT), fraud, cyber threats, and market volatility.

Bundi noted that although the cryptocurrency market is highly volatile, the introduction of stablecoins have significantly enhance the stablility of virtual assets.

"Stablecoins have significantly reduced risks associate with crypto volatility. Unlike most cryptocurrencies that experience price swings, stablecoins are pegged 1:1 to stable assets like US dollar. This stability make stablecoins better option for transferring, exchanging or storing value," Bundi noted.

To address these concerns, the industry is pushing for stronger regulatory oversight and technological safeguards, including the adoption of Central Bank Digital Currencies (CBDCs) among other solutions expected to feature prominently at the upcoming Afro-Asia FinTech Festival 2025.

CBK lowers base lending rate

In other news, the CBK announced the reduction of its benchmark lending rate by 25 basis points to 9.75% following the Monetary Policy Committee (MPC) meeting on Tuesday, June 10.

The MPC noted that Kenya’s macroeconomic indicators have generally improved, creating room for easing monetary policy, with overall inflation dropping to 3.8% in May 2025 from 4.1% in April.

CBK has continued to lower the base lending rate to lower the loan costs and increase credit accessibility to spur economic recovery particularly the private sector.

Proofreading by Asher Omondi, copy editor at TUKO.co.ke.

Source: TUKO.co.ke