Kenya is developing a comprehensive legislative framework to regulate the virtual asset sector, aiming to balance innovation with consumer protection and financial stability. The Virtual Assets and Service Providers Bill, 2025 (VASP Bill) is the country’s first dedicated legislation to regulate the industry, with the goal of positioning Kenya as a leader in digital finance in Africa. The bill has passed the assembly stage and is nearing assent by the President.
Governing bodies and key history
Before the VASP Bill, there were no specific regulations for crypto assets in Kenya; regulatory issues were handled under existing laws like the Capital Markets Act and the Central Bank of Kenya Act. In 2015, the Central Bank of Kenya (CBK) had issued a public notice cautioning the public about virtual currencies, citing their lack of regulatory oversight and high volatility. However, in 2025, the country’s position evolved with the drafting of the VASP Bill.
The VASP Bill, 2025, designates the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) as the primary regulators for virtual asset services. The CBK will oversee services like wallet provision, aligning with its role in payment systems, while the CMA will regulate exchanges and offerings like Initial Coin Offerings (ICOs), which are similar to traditional securities. The Bill also gives the Cabinet Secretary for the National Treasury the power to appoint additional regulators as the sector evolves. A key driver for this regulation is Kenya’s effort to be removed from the Financial Action Task Force (FATF) grey list by aligning with international standards on virtual assets.
The most recent text definition of key items
- Virtual Asset (VA): A digital representation of value that can be digitally traded or transferred and used for payment or investment purposes. The Bill explicitly excludes digital representations of fiat currencies, e-money, securities, and other financial assets from this definition.
- Virtual Asset Service Provider (VASP): An entity that offers virtual asset services in or from Kenya. The Bill specifies various services, including wallet provision, exchange services, brokerage, and investment advice.
- Virtual Asset Offerings: The Bill provides a broad definition for this term but omits key definitions like Initial Coin Offerings (ICOs), Initial Token Offerings (ITOs), and white papers, which are noted as important for investor protection and regulatory oversight.
- Anonymity-Enhancing Services: The VASP Bill explicitly prohibits services that are intended to conceal information about digital asset transactions, such as wallet addresses or transaction histories, in order to promote transparency and traceability.
The key elements of the regulation
The VASP Bill is designed to create a comprehensive regulatory framework that addresses the risks of virtual assets while fostering a conducive environment for legitimate businesses.
- Licensing: All entities providing VASP services in Kenya must obtain a license from a designated regulatory authority. Operating without a license is a criminal offense.
- Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF): The Bill places a strong emphasis on AML/CTF compliance and amends the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA) to include VASPs as reporting institutions.
- Consumer Protection: The Bill requires VASPs to establish internal dispute resolution mechanisms, provide clear risk disclosures, and prohibit false or misleading advertising and unfair trading practices.
- Financial Integrity: The VASP Bill aims to ensure financial stability and market integrity, and to prevent conduct that could damage Kenya’s financial reputation.
Requirements for the VASP
To be licensed, a VASP must meet a set of rigorous requirements.
- Legal Entity Status: Only incorporated companies (domestic or foreign with a certificate of compliance) are eligible to apply for a license. Natural persons are barred from operating as VASPs.
- Financial Requirements: Applicants must demonstrate financial capacity, including meeting capital, solvency, and insurance requirements. They must also have a functional local bank account in Kenya.
- Personnel: The VASP must appoint a minimum of two directors who are natural persons and a CEO who is approved by the regulator. These key officers must be « fit and proper » persons with relevant experience and a good reputation.
- Operational Standards: VASPs are required to maintain a registered physical office in Kenya, have adequate cybersecurity and data protection measures, and implement effective internal policies to manage conflicts of interest. They must also maintain adequate safeguards for client assets and keep them separate from their own.
What it means for the stakeholders
- Consumers and Investors: The new regulations aim to protect consumers from scams and financial harm, which have been prevalent in the unregulated market. Clear rules provide a framework for getting money back and offer legal recourse in case of platform failures.
- Financial Actors (banks, fintechs, etc.): The regulatory clarity provided by the VASP Bill is expected to reduce the hesitancy of traditional financial institutions to engage with virtual assets. It creates opportunities for fintech startups and global crypto firms to expand into Kenya, leveraging the country’s dynamic digital economy. However, the bill could create « double compliance requirements » on existing financial laws.
- VASPs: The Bill provides a clear pathway for VASPs to operate legally, fostering legitimacy and investor confidence. However, the strict licensing and compliance obligations, including a 3% Digital Asset Tax (DAT) on all transactions regardless of profitability, could present significant challenges for some businesses. Penalties for non-compliance are severe and can include fines, imprisonment, and revocation of licenses.
To read further on the topic, please read the following:
- Kenya’s VASP Bill, 2025: Pioneering a Regulated Future for Digital Assets: https://www.proftomojiendaandassociates.com/kenyas-vasp-bill-2025-pioneering-a-regulated-future-for-digital-assets/
- Kenya’s VASP crypto bill passes assembly stage, nears assent: https://techcabal.com/2025/10/03/kenya-vasp-bill-passes-assembly-stage/
- Kenya’s Virtual Asset Service Providers Bill 2025: A Review: https://cmadvocates.com/blog/the-virtual-asset-service-providers-bill-2025/
- What To Know About Cryptocurrency Regulations In Kenya 2025: https://marshacreatives.co.ke/about-cryptocurrency-regulations-in-kenya/
