Kenya’s cryptocurrency industry is facing a major shift after the National Treasury released a draft set of rules aimed at bringing order and stronger oversight to the fast-growing digital asset space.
The proposed regulations, known as the Virtual Asset Service Providers (VASP) Regulations 2026, were announced in a public notice on Tuesday, March 17, and are expected to significantly change how crypto-related businesses operate in the country.
According to the Treasury, the new framework is designed to introduce clear laws for companies dealing with cryptocurrencies, including exchanges, digital wallet providers, and other intermediaries.
For years, the sector has operated with limited formal regulation, creating both opportunities and risks. With these new proposals, the government is now seeking to strike a balance between encouraging innovation and protecting users from potential harm.
The draft rules are anchored in the Virtual Asset Service Providers Act, 2025, a law that was passed to provide a legal foundation for licensing and regulating crypto businesses operating within and from Kenya.
In its notice, the Treasury explained that the regulations are meant to fully implement this law by setting out detailed requirements that all Virtual Asset Service Providers (VASPs) must follow.
One of the key proposals is that only companies registered locally in Kenya will be eligible for full licensing.
Foreign firms are not completely locked out, but they will first need to obtain a compliance certificate before they can be considered for licensing. This move is aimed at ensuring that all players in the market are accountable to local regulators and laws.
In addition, crypto service providers will be required to establish a physical office within the country. This requirement is meant to improve oversight and make it easier for authorities to monitor operations.
Directors and senior managers of these firms will also undergo strict background checks and competence assessments to confirm that they are fit to run such businesses responsibly.
The draft regulations go further to introduce strict financial safeguards, especially for companies dealing with stablecoins and other tokenised assets. Issuers will be required to hold reserves in highly liquid and low-risk instruments.
These include cash, deposits held with the central bank, short-term government securities with maturities of no more than 90 days, and repurchase agreements that mature within seven days. The aim here is to ensure that customer funds remain safe and can be accessed when needed.
For stablecoin issuers, the rules are even tighter. At least 30 percent of customer funds must be kept in separate accounts within Kenyan commercial banks.
The rest of the funds must be invested in secure, low-risk financial instruments classified as high-quality liquid assets. This approach is meant to reduce exposure to risks such as market volatility, credit defaults, and over-concentration in a single asset class.
The Treasury is also proposing new fees that will directly affect digital asset platforms. Token issuance platforms could be required to charge a 0.05 percent transaction fee on each trade, with both parties contributing.
In addition, companies seeking approval to launch virtual asset offerings may be required to pay a fee equivalent to 0.5 percent of the total value raised from a successful offering.
These fees are expected to generate revenue while also ensuring that only serious and compliant players enter the market.
Another major highlight of the draft is the restriction of high-risk activities. The regulations specifically prohibit practices that hide or obscure the identity of transaction participants.
This is part of a broader effort to fight financial crimes such as money laundering and terrorism financing, which regulators have long associated with poorly monitored crypto platforms.
Kenya remains one of Africa’s most active cryptocurrency markets, driven largely by widespread mobile money usage and a youthful, tech-savvy population eager to explore new financial technologies.
Estimates suggest that Kenyans hold virtual assets worth around USD 1.2 trillion (approximately Ksh155 trillion), showing just how significant the sector has become in the country’s financial ecosystem.
Despite this rapid growth, the absence of clear and comprehensive regulations has raised concerns among policymakers and financial authorities. There have been fears about consumer protection, fraud, and the potential impact of crypto activities on the wider financial system.
The proposed regulations are therefore seen as a critical step toward addressing these concerns while creating a safer environment for both investors and businesses.
If the draft rules are eventually adopted, they are expected to reshape the crypto landscape in Kenya. Companies dealing in stablecoins, tokenised assets, and other digital financial products will likely need to adjust their operations to meet the new standards.
At the same time, the regulations could position Kenya as a more secure and attractive destination for digital finance innovation, aligning the country with emerging global best practices.
To ensure inclusivity in the decision-making process, the Treasury has invited members of the public and industry stakeholders to share their views on the proposed rules. Public participation forums have been scheduled in major towns such as Nairobi, Mombasa, Kisumu, and Eldoret.
The consultation process is expected to run through April, after which the Treasury will review all submissions before finalising the regulations.
This step gives Kenyans a chance to influence how the future of digital assets in the country will be shaped, at a time when the sector continues to grow both in popularity and economic importance.
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