“Block Worldcoin!” Kenyan MPs ask the Communications Authority

Worldcoin

The controversy surrounding the Worldcoin in Kenya cryptocurrency project seems to have taken a new twist after
revelations emerged that some Kenyans who had their eyeballs scanned are experiencing sight challenges.

Some of the victims now claim that they were shortchanged in the deal and did not receive the Ksh.7, 000 that had been
promised to them but were instead given 2,000 shillings.

The Kenyan Capital Markets Authority (CMA) had stated it was concerned about the ongoing registration and notified
Kenyans that Worldcoin in Kenya was not regulated, and had therefore suspended all activities of the newly launched
cryptocurrency company within 10 days of its launch in the country.

Understanding Worldcoin

Worldcoin is a digital identification platform that aims to provide each person on earth with a convenient way to verify that they are a real human and not a bot or an AI algorithm. The company was cofounded by Altman, who is better known for
creating ChatGPT.

Worldcoin is different from other popular cryptocurrencies, such as Bitcoin and Ethereum, because it offers people a
token for the future without requiring any investment funds upfront
To get Worldcoin in Kenya, people are needed to scan their eyes through a sphere-shaped device called the Orb to ensure
everyone is human and only signs up once.
After they are scanned, there is a transaction that follows, and it works so simple, users send their tokens from the
Worldcoin app to a crypto wallet address specified by the buyer. Upon receipt of the tokens, the buyer sends cash to their mobile money wallets or hands them cash.

However, a parliamentary committee tasked with investigating Worldcoin in Kenya has recommended that regulators shut
down the project’s operations in the country.

According to a report released on Sept. 30 by Kenya’s parliament, Worldcoin in Kenya has continued to collect personal data of Kenya’s residents “in total disregard” of an order to stop issued in May — potentially including information from minors.
The committee recommended that Kenyan authorities “disable the virtual platforms” of Worldcoin in Kenya as well as
investigate its companies for potential criminal charges.

The Role of the Communications Authority

The Communications Authority of Kenya (CA) is the regulatory body responsible for overseeing and regulating the
communications sector in Kenya.
It typically operates in the telecommunications sector by formulating and implementing policies and regulations to ensure fair competition, efficient spectrum management, and the provision of quality services to consumers.

It also monitors and enforces compliance with these regulations, promotes innovation and investment in the sector, and works to expand access to communication services across the country.
The CA, since the launch of Worldcoin in Kenya, has undertaken a preliminary review and noted a number of legitimate regulatory concerns that require urgent attention
In a joint statement to the media on Wednesday, the CA and the Office of the Data Protection Commissioner (ODPC)
raised a number of regulatory issues with Worldcoin which warranted a multi-agency inquiry to understand its operations
and implications on users of the service.

The statement identified obtaining consumer (data subject) consent in exchange for monetary reward which borders on
inducement, as a major concern.
The other issues included lack of clarity on the security and storage of the collected sensitive data (facula recognition and iris scans), inadequate information on cybersecurity safeguards and standards and massive citizen data in the hands of private actors without an appropriate framework.

‘‘These issues require comprehensive inquiry to enable regulators to advise stakeholders on appropriate measure to
protect public interest,’’ reads the statement in part.
The regulators observed that Worldcoin in Kenya has faced similar inquiries in other jurisdictions such as Germany,
France, the United Kingdom, and India.

The Need for Regulation

Kenya, like many other countries, needs regulations for virtual assets like Worldcoin in Kenya to ensure consumer
protection, prevent fraud, and mitigate the risk of financial crimes such as money laundering and terrorism financing.
Regulations help create a clear legal framework for the use of virtual assets, fostering investor confidence and promoting responsible innovation in the cryptocurrency and blockchain space.
Unregulated digital currencies carry significant risks, including the potential for fraud and scams, as there are no
safeguards in place to protect consumers from fraudulent schemes or Ponzi schemes.
Additionally, they can be used for illegal activities such as money laundering, tax evasion, and financing terrorism, as
anonymity and lack of oversight make it difficult to trace and regulate transactions.
A well-regulated virtual asset market can bring several benefits. It can enhance investor protection, promote market
integrity, and reduce the risk of fraud, fostering confidence among participants and attracting institutional investors.
Additionally, effective regulation can help mitigate the use of virtual assets for illegal activities, ensuring compliance with anti-money laundering and anti-terrorism financing laws, while also encouraging responsible innovation in the blockchain and cryptocurrency space.

Proposed Measures: Blacklisting IP Addresses and
Suspending Physical Presence

To blacklist IP addresses means to block or restrict access to a specific set of IP addresses from accessing a network,
website, or online service. This is often done for security or administrative reasons, such as blocking IP addresses
associated with malicious activity or to prevent unauthorized access.

A Kenyan parliamentary panel called for the suspension of the company’s physical presence in Kenya until there is a
legal framework for regulation of virtual assets and virtual services providers.
This would likely involve ceasing any physical operations, offices, or infrastructure associated with their cryptocurrency operations within the country.

This, together with blocking their IP addresses, means Worldcoin in Kenya discontinuing any in-person customer support, marketing activities, or administrative functions, while maintaining their online presence and digital operations as permitted by the regulatory framework in Kenya.

Impact on Kenyan Citizens

Local media have reported that more than 350,000 Kenyans had signed up for Worldcoin since its launch, in exchange for
free cryptocurrency tokens worth around 7,000 Kenyan shillings ($49).
Its suspension now means that those who had registered and expected to receive the 7,000 Kenyan shilling token might
face disappointment and loss of potential benefits.
Unregulated virtual assets can have significant consequences for individuals. They may face increased risks of financial
losses due to fraud and scams, lack of consumer protection, and volatility in the value of unregulated cryptocurrencies, as well as potential legal issues if their use of virtual assets runs afoul of local regulations.
It is therefore crucial to protect consumers in the digital currency space to ensure their financial security, safeguard their investments, and maintain confidence in the integrity of the financial system.

Building a Regulatory Framework

Developing a regulation and enforcement infrastructure for virtual assets typically involves establishing clear legal
frameworks, defining the roles and responsibilities of regulatory authorities, and implementing robust monitoring and enforcement mechanisms.

This includes creating licensing requirements for virtual asset service providers, implementing anti-money laundering and counter-terrorism financing controls, and fostering international cooperation to address cross-border challenges
associated with virtual assets.

The Treasury plays a significant role in developing these regulation and enforcement infrastructure for virtual assets by formulating policies, providing guidance, and proposing legislation that addresses issues related to digital currencies and blockchain technology.

It also coordinates with other government agencies and international organizations to ensure a holistic and consistent approach to regulating virtual assets, particularly in areas related to taxation, monetary policy, and financial stability.

Kenya can collaborate with international organizations by actively participating in forums, working groups, and
conferences focused on digital currencies and blockchain technology, allowing the country to exchange knowledge, learn
from global experiences, and adopt best practices in the regulation of virtual assets.