NAIROBI, Kenya — Parliament has cleared the Virtual Assets Service Providers (VASP) Bill 2025, a milestone step toward formalising Kenya’s once-amorphous cryptocurrency sector.
Under the proposed law, platforms dealing in crypto, wallets, custodial services, and related digital asset operations will now be required to register, comply with licensing rules, and adhere to stringent oversight by the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA).
The move signals a transition from regulatory caution to engagement as Kenya adapts to global standards for virtual asset governance. But it also raises critical questions about enforcement, inclusion, and whether oversight can keep up with innovation.
Key Provisions & Institutional Responsibility
A major change in the final draft of the Bill is the abandonment of a new, standalone regulatory body (previously proposed as VARA).
Instead, oversight for Virtual Asset Service Providers will be shared between CBK and CMA, streamlining institutional responsibility and avoiding fragmentation.
Under the Bill:
- All entities providing virtual asset services must obtain annual licenses.
- Platforms must maintain a physical presence in Kenya, making purely offshore operations illegal under the law.
- Operators will be subject to know-your-customer (KYC) rules and anti-money-laundering (AML) / counter-terrorism financing (CFT) controls.
- Transaction details exceeding specified thresholds must be reported to regulators or relevant financial intelligence units.
- Failure to comply could lead to revocation of licenses or fines — some proposals cite penalties in the tens of millions of shillings.
In tandem, government policy documents define “virtual assets” broadly, covering digital representations of value used for payment, investment, or transfer — capturing crypto, tokenised assets, and similar innovations.
The draft national policy supporting the Bill emphasises risk management, financial literacy, cybersecurity, and coordination across multiple regulators.
Why an Overhaul Was Needed
Kenya’s digital-asset space has long existed in regulatory limbo. The 2023 Money Laundering / Terrorism Financing (ML/TF) risk assessment flagged vulnerabilities in the virtual assets sector, notably anonymity, cross-border flows, and lack of oversight.
Cryptocurrency adoption in Kenya—particularly among youth and online communities—has ballooned in recent years.
The lack of legal clarity has exposed investors to scams, “pump-and-dump” schemes, hacks, and fraud. The Bill’s architects say regulation will restore confidence and better protect retail participants.
In legal commentary, the Bill is seen as a direct response to the increase in crypto scams. For example, schemes that artificially inflate token prices then abandon investors are explicitly targeted through stricter licensing and disclosure mandates.
Opportunities & Risks Ahead
If well implemented, the VASP Bill could unlock several benefits:
- Investor protection: Formal licensing and oversight can create safer entry points for Kenyans who have hesitated to engage in crypto due to regulatory uncertainty.
- Cross-border finance and remittances: Lower-cost, faster transfers using crypto could supplement traditional remittance flows, especially with diaspora connectivity.
- Innovation incentive: Fintech firms may feel more confident building blockchain-based services, tokenisation platforms, and decentralized applications under legal certainty.
Yet, risks also loom:
- Regulatory capacity constraints: CBK, CMA, and related agencies will need staff, systems, and technical skills to monitor often complex, fast-moving crypto activity.
- Gray markets and evasion: Some operators may remain offshore or use intermediaries to skirt local licensing.
- Access & inclusion: Smaller players and grassroots innovators may struggle with licensing costs or compliance burdens, potentially reinforcing dominance by larger firms.
- Global compliance mismatches: Transactions crossing borders still challenge enforcement — foreign-based frauds may target Kenyan users despite local regulation.
What Comes Next
The Bill now awaits presidential assent before becoming law. Once enacted, the transition period allows VASPs to apply for licenses and align operations.
Parliament is expected to table regulations and secondary legislation, prescribing thresholds, disclosure formats, audit standards, and enforcement mechanisms. The policy also calls for periodic reviews to keep pace with emerging technologies.
As Kenya sets this direction, the success of its crypto strategy will hinge on bridging aspiration and execution — ensuring the regulators stay ahead of innovation, not behind it.
