Kenya has introduced the Virtual Asset Service Providers Bill, 2025, a long-awaited step toward regulating digital assets and the businesses that deal with them. The Bill proposes a comprehensive licensing and oversight regime for Virtual Asset Service Providers (VASPs), including platforms dealing in cryptocurrencies, custodial wallets, stablecoins, digital asset brokers, and tokenization. This move will bring long-needed clarity to Kenya’s booming but largely informal virtual asset sector.
Key Highlights of the Bill
- Licensing is mandatory for any entity offering virtual asset services in or from Kenya. Only incorporated legal entities are eligible, natural persons are excluded.
- The Bill covers a wide range of services, from exchanges, custodial wallets, and payment processors to virtual asset advisers and tokenization platforms.
- Regulatory oversight is split between the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK), depending on the nature of the service.
- The law imposes obligations on fit and proper leadership, minimum capital, robust cybersecurity, record-keeping, and compliance with the Data Protection Act. Entities have a 12-month transitional period after commencement to comply and obtain licensing.
Legislative Hurdles: What Could Delay the Bill?
While the Bill is timely, its passage through Parliament is not guaranteed. Potential roadblocks include:
- Overlapping regulator roles between the CBK and CMA may create institutional pushback.
- Legislators’ limited technical grasp of crypto, blockchain, and DeFi could stall debate or trigger excessive caution.
- Concerns around data access and surveillance powers, especially with provisions for real-time transaction monitoring, could raise alarms for civil society and data protection advocates.
- Informal industry resistance, from local and offshore players currently operating without scrutiny, may lobby against full regulation.
What’s Driving This Move?
The Bill is Treasury-sponsored, underscoring the State’s intent to:
- Tap into digital asset taxation. The KRA is already enforcing a 3% tax on digital asset transfers and collected KES 10 billion from 384 crypto traders in 2023/24 alone.
- Close financial crime gaps. The Bill aligns with Kenya’s AML and CFT obligations, especially with the Financial Action Task Force (FATF) guidance on virtual assets.
- Bring regulatory clarity. CBK had previously issued strong warnings, including a 2015 notice and multiple statements by former Governor Patrick Njoroge, against using or trading crypto due to its volatility and opacity. This Bill represents a policy reversal, towards regulating rather than rejecting.
Global Context: Kenya Joins a Growing Movement
Across the world, governments are moving quickly to formalize digital assets:
- EU: The Markets in Crypto-Assets (MiCA) framework is being implemented in 2024 to govern stablecoins, exchanges, and token issuers.
- Hong Kong: Licensed digital asset platforms are expanding into derivatives and tokenized securities.
- Mauritius: Introduced the Virtual Asset and Initial Token Offering Services Act in 2021 and is considered a regional pioneer.
With this Bill, Kenya joins other progressive jurisdictions embracing digital innovation, while aiming to protect consumers and prevent misuse.
How Cavendrys Can Help;Our legal team is closely tracking the progress of the Bill and its potential impact on tech-driven businesses.
We’re uniquely positioned to support:
- Structuring your business model for eligibility under the new VASP regime
- Licensing and regulatory applications, including engagement with the CMA or CBK
- Compliance with AML/CFT, data protection, and financial reporting obligations
- Assessing exposure for existing digital asset activity, including stablecoins and tokenized assets
- Making stakeholder submissions during public participation phases of the Bill
