• Kenya’s Parliament passes Virtual Asset Bill to regulate crypto, awaiting Ruto’s assent for final approval.

• Law mandates VASP licensing, AML/KYC compliance, and consumer safeguards to boost trust and investment.

• Reform could attract FDI, create 10,000 fintech jobs, and make Kenya a regional blockchain innovation hub.

In Kenya, the passage of the Virtual Asset Service Providers Bill, 2025, by the National Assembly puts the country on the verge of establishing a new central regulation for crypto-assets in Africa. Awaiting President William Ruto’s assent, this landmark legislation aims to establish the country’s first comprehensive legal framework for virtual assets, encompassing cryptocurrencies, stablecoins, and blockchain-based tokens.

The bill, approved on October 7 with broad bipartisan support, aims to bring coherence to Kenya’s fast-growing digital asset sector, where an estimated 4.5 million citizens—around 13% of the population—engage in crypto-related activity. For years, this ecosystem has expanded in the absence of specific regulation, leaving consumers vulnerable to fraud and limiting formal investment.

The new legislation establishes clear licensing and registration requirements for all Virtual Asset Service Providers (VASPs), including exchanges, brokers, wallet operators, and token issuers. It assigns oversight responsibilities to both the Central Bank of Kenya (CBK), for payment and custody functions, and the Capital Markets Authority (CMA), for investment and trading activities.

The bill also embeds stringent anti-money laundering (AML) and counter-terrorism financing (CFT) provisions in line with Financial Action Task Force (FATF) standards. All service providers will be required to implement Know Your Customer (KYC) procedures, maintain client fund segregation, and report suspicious transactions.

Building Consumer and Investor Confidence

Beyond compliance, the legislation prioritizes consumer protection. It prohibits deceptive advertising, compels transparent risk disclosures, and empowers regulators to suspend or revoke licenses for misconduct. Offenders may face fines of up to 5 million Kenyan shillings (approximately 38,000 USD) or imprisonment. A one-year transition period will allow existing operators to align with the new rules.

Crucially, the framework amends existing financial laws to recognize certain virtual assets as securities, thereby paving the way for the development of regulated trading and investment products. It also integrates recent fiscal revisions, notably a reduction of the digital asset tax rate from 3% to 1.5%, designed to stimulate adoption while maintaining fiscal prudence.

By formalizing operations and protecting consumers, the bill is expected to reduce the incidence of fraud that has tarnished Kenya’s crypto market and restore investor confidence. It also supports Kenya’s ongoing efforts to exit the FATF greylist, a designation that has discouraged foreign investment since 2023. Compliance with international standards could thus translate into improved credit ratings and stronger capital inflows.

With the IMF and World Bank encouraging regulatory clarity in digital finance, Kenya’s framework positions it as a model for other African countries still grappling with crypto oversight. South Africa currently leads with a mature Financial Sector Conduct Authority regime, while Nigeria—despite early adoption—has struggled with enforcement. Kenya’s dual-regulator model, combined with a moderate tax regime, offers a middle path: firm enough to protect the system, yet flexible enough to encourage innovation.

On the economic side, industry estimates suggest that precise regulation could attract foreign direct investment and generate thousands of fintech-related jobs by 2027. Moreover, integration between licensed crypto platforms and Kenya’s leading mobile money network, M-Pesa, could create new efficiencies in remittances and cross-border payments, worth approximately $5 billion in 2024.

Toward Regional Leadership

Across the continent, digital asset regulation is rapidly evolving. Tanzania has introduced a 3% crypto tax, Ghana is finalizing licensing guidelines, and Mauritius has maintained a crypto-friendly regime since 2018. Kenya now joins this small but influential group of African countries that are seeking to reconcile innovation with financial integrity.

If President William Ruto assents as expected, the Virtual Asset Service Providers Bill will come into force within weeks. Its success will depend on how regulators balance enforcement with support for innovation, and whether the private sector can adapt quickly to new compliance demands.

Idriss Linge