Parliament Finds Worldcoin Exploited Kenya’s Regulatory Gaps

National Assembly committee on worldcoin

Kenya’s parliament Ad Hoc Committee on Worldcoin operations in Kenya released its report. To recap, the Ad Hoc committee was set up on 15th of August 2023. The main objective was to look into the activities of Worldcoin.

Worldcoin is a cryptocurrency firm whose activities were suspended. The suspension was largely due to data privacy concerns raised by Kenyans. As a result, the National Assembly set out to explore the regulatory landscape for virtual assets in Kenya.

Worldcoin Exploited Regulatory Loopholes

The Ad Hoc committee was chaired by Hon. Gabriel Tongoyo. Hon Tongonyo also serves as the Chairperson of the National Assembly Committee on Administration and Internal Security.

Under his leadership, the members looked into data protection and virtual assets regulations from various jurisdictions. Notably, they examined the United States, where data protection laws are intricate and continuously evolving. Regulations are primarily a patchwork of sector-specific and state-level regulations.

Interestingly, the committee found, Worldcoin operated in Kenya, a country with no specific regulations on virtual assets, while abstaining from operating in the USA. Worldcoin claimed this was due to regulatory uncertainty.

This contrast in their approach raised questions about the exploitation of Kenya’s weaker legal framework in comparison to the USA.

Further, the committee  looked into international models for regulating Crypto Asset Service Providers (CASPs). South Africa provided a notable example, emphasizing six principles to guide CASP regulation, aimed at promoting responsible innovation and overseeing provider conduct.

Worldcoin Poses a Threat to Statehood

The Committee’s findings and observations were multifaceted. They noted that Worldcoin’s primary objective of creating a global digital identification platform (World ID) aimed to verify individual identities. They also found that Tools for Humanity Corp and Tools for Humanity GmbH had began operating in Kenya even before registering as data controllers.

In fact, they disregarded orders and directives from Kenyan authorities, hence, violating Kenyan laws.

Furthermore, the Committee recognized that Worldcoin’s mission to decentralize the global monetary system posed a potential threat to statehood. Unlike fiat currencies, cryptocurrencies are digital, encrypted, and decentralized, lacking a central authority to determine their value.

This value is determined through speculative actions by users, raising security concerns due to anonymity, borderless transactions, decentralization, and limited regulation in Kenya.

Parliament Committee Recommendations

Based on their findings, the parliament Committee made several recommendations. First, they recommend that Kenya should develop comprehensive oversight framework and policies for virtual assets and service providers in Kenya.

Secondly, the committee would like that within six months of adopting the report, the CS National Treasury, in collaboration with stakeholders, should create regulations and enforcement infrastructure to ensure adequate regulation and monitoring of virtual assets and service providers.

Lastly, the member recommends that the Office of the Director of Public Prosecutions (ODPP) should investigate the operations of Tools for Humanity Corp and Tools for Humanity GmbH in Kenya and take appropriate legal action.

In the course of its inquiry, the Ad Hoc Committee received submissions from a multitude of key stakeholders, including government bodies like the National Computer & Cybercrimes Coordination Committee (NC4), the Attorney General, and the Central Bank of Kenya (CBK).

In addition, private entities such as Sense Marketing Limited and Tools for Humanity Corp and Tools for Humanity GmbH also participated. Sense Marketing Limited is a local company that had been hired for data collection by Worldcoin. Notably, three university students who were involved in Worldcoin activities provided their insights.

The committee’s report will now be presented to parliament.