Kenya’s Parliament has passed a groundbreaking law aimed at regulating digital currencies and virtual assets, marking a pivotal step toward formal oversight of the country’s fast-growing cryptocurrency ecosystem. The Virtual Asset Service Providers Bill 2025, recently approved by lawmakers, now awaits presidential assent to officially become law.
A Framework for Regulating Digital Finance
The legislation establishes a comprehensive framework for licensing digital asset issuers, exchanges, and service providers. It seeks to enhance investor protection, prevent illicit activities, and attract foreign investment into Kenya’s thriving fintech sector. The new law positions Kenya to become one of Africa’s leading centers for blockchain and crypto innovation amid a rapidly expanding digital economy.
Shared Oversight Between CBK and CMA
Under the new regulatory framework, two main institutions will share oversight responsibilities. The Central Bank of Kenya (CBK) will regulate stablecoins and other digital currencies, while the Capital Markets Authority (CMA) will supervise crypto exchanges, brokers, and trading platforms. This dual-oversight model replaces earlier proposals for a standalone crypto authority, integrating digital asset regulation within Kenya’s established financial systems for greater consistency and efficiency.
Strict Compliance and Licensing Requirements
All virtual asset service providers (VASPs) operating in Kenya will be required to maintain a physical presence in the country and comply with stringent regulatory standards. These include the segregation of client funds from company accounts, adherence to anti-money laundering (AML) and counter-terrorism financing (CTF) laws, and the establishment of strong corporate governance structures.
The bill introduces significant penalties for violations, including heavy fines and imprisonment for non-compliance. Lawmakers say the tough measures are designed to discourage fraudulent activity and foster public trust in digital asset transactions.
Stablecoins Under Central Bank Oversight
The move to place stablecoin regulation under the CBK reflects growing global concerns about their potential impact on monetary policy. By doing so, Kenya aims to strike a balance between innovation and financial stability, allowing for digital finance growth while protecting the integrity of the national currency.
Empowering Kenya’s Young and Tech-Savvy Population
With a large proportion of Kenya’s youth aged 18 to 35 increasingly adopting cryptocurrencies for investment, payments, and cross-border trade, the bill is seen as timely and transformative. It aligns with Kenya’s reputation as a fintech pioneer, following the success of mobile money platforms like M-Pesa.
Aligning with Global Best Practices
By introducing this law, Kenya seeks to close previous regulatory gaps and align with international standards for digital asset management. The framework is expected to strengthen investor confidence, promote legitimate market operations, and place Kenya at the forefront of Africa’s digital finance revolution.
