Kenya’s First Attempt at Regulating Crypto
A 2025 guide to licensing, compliance, and the future of digital assets in Kenya
1. What Is the VASP Bill?
The Virtual Asset Service Providers Bill, 2025 is Kenya’s first comprehensive attempt to regulate cryptocurrency and digital asset services. It was introduced to Parliament in April 2025 and is currently under review2.
Its goals:
- Protect consumers from fraud and scams
- Combat money laundering and terrorism financing
- Create a legal framework for crypto exchanges, wallets, and token issuers
- Align Kenya with global standards (e.g. FATF Recommendation 15)
2. Who Will Be Regulated?
The Bill defines a Virtual Asset Service Provider (VASP) as any company that:
- Offers crypto exchange services (fiat-to-crypto or crypto-to-crypto)
- Provides crypto wallets or custody services
- Facilitates token issuance (e.g. ICOs, ITOs)
- Operates a crypto trading platform (centralized or decentralized)
Only registered companies (not individuals) can apply for a VASP license.
3. Who Will Regulate the Sector?
The Bill introduces a dual-regulator model:
| Regulator | Role |
|---|---|
| Capital Markets Authority (CMA) | Oversees exchanges, token offerings, investment advice |
| Central Bank of Kenya (CBK) | Regulates wallets, stablecoins, and payment systems |
This mirrors global best practices and aims to avoid regulatory gaps2.
4. Key Requirements for VASPs
To operate legally in Kenya, VASPs must:
- Register as a company under the Companies Act
- Apply for a license from CMA or CBK
- Maintain a physical office in Kenya
- Appoint a Kenyan CEO and “fit and proper” directors
- Implement AML/CFT controls (e.g. KYC, suspicious transaction reporting)
- Protect customer assets and publish audited financials
- Comply with cybersecurity and data protection laws
5. What Happens If You Don’t Comply?
The Bill includes strict penalties:
- Operating without a license: Up to KSh 10 million fine or 5 years in prison
- Violating AML/CFT rules: Additional fines and criminal liability
- Misleading investors: CMA can suspend or revoke licenses
6. What’s Not Covered?
The Bill excludes:
- Non-fungible tokens (NFTs) used only for art or collectibles
- Closed-loop tokens (e.g. loyalty points, in-game currencies)
- Digital representations of fiat currency (e.g. M-PESA, CBDCs)
- Virtual service tokens that don’t have payment or investment functions
7. Industry Reactions: Applause and Alarm
Supporters say:
- The Bill brings clarity and legitimacy to the crypto space
- It could attract foreign investment and make Kenya a regional hub
- It aligns Kenya with global AML standards and helps exit the FATF grey list
Critics warn:
- The Bill may squeeze out small players due to high compliance costs
- Individual entrepreneurs are excluded from licensing
- Privacy concerns over real-time data access by regulators
- DeFi and anonymity tools (e.g. mixers) are effectively banned
8. What This Means for You
| If You’re a… | What to Expect |
|---|---|
| Crypto User | Safer platforms, but stricter KYC and fewer anonymous tools |
| Startup Founder | Need to register, license, and comply with AML rules |
| Investor | More legal protection, but fewer “wild west” opportunities |
| Freelancer | Easier to declare crypto income and access financial services |
| Regulator | Clearer mandate, but higher enforcement burden |
Final Word
The VASP Bill is Kenya’s boldest step yet toward crypto legitimacy and consumer protection. If passed with balance, it could make Kenya a continental leader in digital asset regulation. But if overreaching, it risks stifling innovation and excluding the very entrepreneurs who built the space.
