Luno, the UK-based crypto company which operates in South Africa, Nigeria—and recently, Uganda—now has a fourth horse to back in its Africa race: Kenya. On June 23, the company announced its re-entry into the East African country after a 2014 exit, expanding its regional presence.
Luno, operating as BitX, first entered Kenya in 2013. It was one of the first startups to offer cryptocurrency trading services in the country, alongside then-competitors—both foreign and local startups—such as Kipochi (which shut down after Safaricom blocked its access to M-Pesa), BitPesa (now AZA Group), and early peer-to-peer (P2P) marketplaces such as LocalBitcoins and Paxful.
The market Luno is returning to ten years later radically differs from the one it left behind. Over the past decade, Kenya has grown into East Africa’s most active cryptocurrency market. The rise of mobile money platforms like M-Pesa, coupled with increasing smartphone penetration and youth-driven digital adoption, has made Kenya a fertile ground for the sector.
Regulatory uncertainty pushed Luno to exit in 2014, but today, that environment is cautiously evolving. A new Virtual Asset Service Providers (VASP) Bill is in the works, promising formal licencing under the oversight of the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA).
In its comeback, Luno is betting on this regulatory shift—and its decade of experience across Africa. The company has grown to over 15 million global users and now holds a crypto licence in South Africa.
Yet, it won’t be an easy ride for Luno, as Kenya has become a tougher market to compete in with deep-pocketed foreign players such as Binance, Huobi, and OKX, gaining a foothold in the market with their local presence.
spoke with Apollo Sande, Luno’s country manager for Kenya and Uganda, who has led the company’s expansion efforts in East Africa for six years.
This interview has been edited for length and clarity.
After more than a decade, why did it make sense to re-enter a market where there is still no licencing framework in place for crypto exchanges?
In 2014, the Central Bank released a circular that stopped banks from working with crypto exchanges and crypto enterprises in Kenya. This made Luno leave the market. Kenya was actually Luno’s second launched market back in 2013, before it began a global expansion.
Then sometime in 2019, Luno decided to take another look at its Africa expansion. I got onboarded and analysed the various markets in East Africa. We prioritised Uganda because it had regulatory certainty. It was easier to have discussions with the Bank of Uganda and other regulators—but Kenya was the prize. Kenya had always been in our sights given the size of its crypto market.
We planned for it and waited while maintaining ongoing interactions with regulators. We were involved in many discussions with authorities in Kenya and Uganda. In December 2024, we decided to re-enter the market. A soft launch has been running since then, and we have now moved to a full launch.
What structural risks existed in 2014 when Luno exited Kenya, and do they still exist today?
The biggest risk was the banking ban. It prevented the integration of crypto players with the formal financial system. Startups had to find alternative channels to on- and off-ramps, which led to the rise in P2P payment rails.
P2P rails pose massive risks for customers. They transfer platform risk to the customer. We have seen traders getting arrested or taken to court because they innocently transacted with bad actors. There have been lots of transaction failures, delays, and bad counterparties. The lack of regulation meant players had lax Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols.
This has continued until now. The upcoming regulations will clearly set the standard for crypto platforms. Back in 2012 and 2013, Luno deliberately chose to pay the cost of compliance in advance, knowing it would position us better for a regulated environment. That regulated space is now within reach.
We have formal anti-money laundering regulations and recognition for the industry. Compliant crypto players will secure a position in the market because of the level of trust and stability we bring to the market. We’re banking on this.
Crypto companies still operate in a grey area and no licences have been issued so far. Is this sustainable for long-term operations?
Based on earlier discussions, we observed progress in the regulatory environment. We positioned ourselves while continuing active engagement with regulators. Crypto is not banned in Kenya; only the payment rails were restricted. The methods customers use to deposit and withdraw money in the crypto industry are not yet optimal because we operate outside the existing traditional finance systems. It makes things a little difficult because the playing field is not level.
But see crypto startups as small businesses. It’s not banned, so we just find workarounds. For our Kenyan operations, we’ll make the same play we used in Nigeria when banks stopped working with crypto companies there, too, in 2021. We’ll introduce voucher payments to our Kenyan customers to enable them to easily deposit fiat, buy and sell crypto, and off-ramp to local currency.
In anticipation of upcoming regulations, we expect a lot more certainty. The tax code in Kenya for crypto is undergoing favourable improvement. Regulations are in the final stages at the National Assembly. We think the outcome will be very good for the industry. A lot of the dots have connected, and it is a timely move for us.
Who did Luno Kenya partner with for voucher payment services?
I’d prefer not to provide details about our partner.
The proposal in Kenya is to tax 10% excise duty on crypto transactions. If this goes through, how will this tax demand affect startups’ ability to comply?
Crypto tax was first enacted in 2013 with the previous finance bill. It was set at 3% of the gross value of all crypto exchanges and transfers. That tax was never collected because it was just impractical.
First, there weren’t any banking rails to remit the taxes. Second, that tax was almost 30 times the revenue that crypto exchanges made from commissions. It would have pushed the industry underground.
There has been intense lobbying from the industry. Fortunately, we have a strong team of technocrats within various regulatory bodies who can understand the issue, research it further, and engage with the industry. It became clear that the tax was unsustainable.
There is now an alternative proposal to tax the industry at 10% of the commissions. This is more or less in line with mobile money transfer charges—actually a little lower—plus a corporate income tax. There are still discussions about the applicability of value-added taxes (VAT). However, the tax now makes the industry sustainable. So pending how the regulations work out, at least taxation is not a barrier.
With regards to licencing, the Virtual Asset Service Providers (VASP) Bill has passed a second reading in Parliament. It was really encouraging to hear that level of understanding and foresight from Honourable Moses Kuria and several members of the National Assembly. We are hopeful of a forward-looking regulatory framework.
I always say we should ask what this industry could do for the economy and the country. Then from there, we can take out the risky parts that diminish that potential. Once the VASP Bill passes, the appointed regulators will then create specific licencing frameworks for the various types of players in the crypto industry. That is when we will have clarity about the pathway to licencing.
Who bears this 10% excise duty burden—the users or the crypto companies?
Previously, we would have had to withhold the customer’s trading capital, which could have made us a target. But with the 10% excise duty, which is common in financial services, we bear it. It is worked into our fees. It eats into our margins but offers a better customer experience and makes collection and remittance easier.
How does this affect Luno’s pricing model and trading margins?
It certainly reduces our margin because it is 10% of the fees we charge customers. There’s also a 30% corporate income tax to bear, and potentially a 16% VAT. Yes, it reduces our margins, but in a sustainable way. It’s workable compared to the previous proposal.
Does this result in additional costs for users on Luno Kenya?
That depends on individual business practices. Some businesses may pass the tax on through their fees. Others may absorb it and take the hit to their margins. Fee structures keep changing based on economic realities and business goals.
For Luno Kenya, we will continue to look at our pricing and keep adjusting it to ensure it’s sustainable, affordable, and acceptable for customers. It is an ongoing decision.
How do you view competition in Kenya, especially with P2P enablers like Binance?
Kenya is a rapidly maturing crypto market with many players. There’s a joke that a new crypto exchange or wallet service provider is launching every two or three weeks here. Competition is part of the game.
Over the past ten years, due to the regulatory environment, those who entered the space were mostly tech-savvy, young, high-risk, entrepreneurial individuals willing to endure the rough patches. They found a way with P2P, and that’s fine.
But there is a huge untapped market of people who would not operate within the frameworks of those P2P platforms. They prefer clarity and transparency in the services they use. That is the vast majority of Kenya’s potential crypto market.
Given the business conduct and governance structures of centralised exchanges like Luno, there is still a large gap we can fill. Competition will be tough, but the market is big enough. I don’t think P2P platforms have captured more than 20% of the potential market.
The VASP Bill will require companies to register with the Central Bank of Kenya and the Capital Markets Authority. How far along are you in engaging with these regulators?
We have engaged with all the regulators, with varying degrees of success. We have worked with the CBK, the CMA, and the Financial Reporting Centre. We’ve spoken to all relevant regulators. The same has happened across the industry.
In the past two years, the conversations have become clearer. Regulations are now under the government, and no regulator wants to front-run or prescribe anything until regulations are enacted.
Right now, it is about building relationships. Drafts indicate who will regulate what. But until licencing frameworks are issued, it’s a wait-and-see approach. A new regulator has also been proposed, and their scope will be defined once the bill and frameworks are formalised. Right now, we wait, observe, prepare, and adjust as needed.
How will Luno Kenya monitor transactions on its platform to meet AML expectations and regulatory standards like the travel rule?
Currently, Luno is available in about 40 countries and is licenced in multiple jurisdictions. Some of these countries have very strong AML, KYC, and counter-proliferation processes, which comply with requirements around the travel rule.
We have been managing these risks and monitoring transactions from the start. We’ve been self-regulating where necessary, even when specific crypto regulations did not yet exist. Many of these standards were adopted from the way traditional financial service providers are being regulated in Kenya.
We comply with FATF guidelines and those of other regulators. We have strong anti-financial crime, compliance, and cybersecurity teams and mature systems in place.
We also conduct training for regulators and law enforcement on various aspects of these systems. Transaction monitoring is one of our key strengths.
Can you describe some of the tools and methods Luno Kenya uses to flag suspicious transactions?
We have a team dedicated to this. We conduct basic KYC—individual and business due diligence (for institutional users). We also perform ongoing transaction monitoring and use tools like Chainalysis and Elliptic for on-chain monitoring.
During onboarding, we assess the source of funds and customer behaviour. We check for sanctions and politically exposed persons (PEPs). Chainalysis also flags wallets linked to banned activities. We monitor customers’ trading activity, and when there is a significant change from their usual pattern, we flag this and apply enhanced due diligence (EDD).
We also monitor third-party deposits and use geo-location and geofencing tools to identify high-risk areas and trace use of virtual private networks (VPNs). We monitor for on-chain and off-chain risks such as dark markets, gambling, and high-risk jurisdictions. We detect fraud, platform abuse, and payment fraud. We defend accounts by alerting customers to phishing and scams and blacklisting malicious devices.
Screening controls, alerts, and a comprehensive risk management framework help us integrate all compliance and monitoring tools into a cohesive system.
All this integrates into a centralised risk management framework for AML, CTF, and counter-proliferation compliance.
How much capital is Luno Kenya committing to its local operations?
We operate with the backing and support of our centralised teams that manage global operations. In markets with larger operations, there are more localised teams. Much of what we do is customised to each country’s needs. Luno Kenya benefits from strong support from our central team.
Luno has evolved from a crypto and stablecoin off-ramp into a broader crypto exchange. Will Luno Kenya launch with this full range of services or a more limited product?
Since 2013, Luno has had a full order book exchange alongside the instant buy/sell functionality. We’ve always offered wallets for storing, sending, and receiving crypto. The instant buy/sell option lets users trade without comparing quotes, and we also have a live exchange with an order book for more flexible trading.
In most markets, the wallet and instant buy/sell functions are the most used. These services have been part of Luno from the start, along with on- and off-ramping. We are debuting in Kenya with the full range of these services.
The change in recent years has been a ramp-up in the number of listed coins on our platforms.
Does Luno charge for listing coins? And how do you decide what to list?
Like most exchanges, we earn commission on transactions. We facilitate secure and liquid trades and charge a small fee for this.
We have a coin listing committee and team that relies on third-party analysis to assess the credibility of coins. We don’t list everything. We try to be responsible and only list coins we would be comfortable investing in ourselves.
We currently don’t have a process for applications or paid listings. We monitor customer demand, assess what we’re comfortable listing, and then we approach the coin issuers.
What’s Luno Kenya’s stance on enabling the adoption of local stablecoins? Could Luno list local stablecoins like the Kenyan Shilling built on the Celo blockchain (cKES)?
We will continue to monitor these developments. It’s not currently under consideration, but it is a possibility. As we did with USDT and USDC, if there is a strong business case and demand, we’ll look at it on a case-by-case basis.
From a growth perspective, what’s Luno Kenya’s immediate goal and key performance metric?
Given Kenya’s P2P heritage, the market needs safe, simple, secure, and transparent service providers. That is what we’re offering, based on over 13 years of secure operations with no hacks, a reliable and user-friendly interface, and trustworthy service.
That alone fills a gap in the market. It offers a significant improvement in customer safety and experience. From that foundation, we will identify more specific goals.
You’re also the Country Manager for Uganda. What does that mean for the scope of your role with Kenya’s operations kicking off?
We’ve been operational in Uganda since 2019. At first, we had access to banking and mobile money rails, but about two and a half years ago, those were banned. We shifted to a crypto-only platform there. You can get in and out using stablecoins and other crypto.
We believe Kenya’s regulatory progress could be replicated in other countries. When there’s regulatory clarity in Uganda, we may consider reopening a full product suite.
For now, we remain active in Uganda as a crypto-only platform. Operations at this capacity will continue in Uganda while we focus on Kenya.
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