Kenya is modifying its regulatory capacity on virtual assets such as crypto by proposing tough penalties for firms that operate without a license under a new bill tabled in Parliament by Majority Leader Kimani Ichung’wa (UDA).
- The Virtual Asset Service Providers Bill, 2025 introduces criminal sanctions, including up to five years in prison and fines of up to KSh 10 million for entities offering crypto-related services being registered.
- The bill would also give regulators, the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA), the power to shut down unlicensed platforms, freeze their assets, and initiate legal action against their directors.
- The aggressive push to regulate the fast-growing cryptocurrency sector is in tandem with the requirements listed by the Financial Action Task Force (FATF) as expedient in Kenya’s quest to escape its grey list.
Virtual asset firms that intend to apply for licenses must prove they have an active presence in Kenya, implement robust anti-money laundering measures, and undergo background checks on directors and beneficial owners. The new bill is an updated version of a Virtual Assets Regulatory Bill from 2024 that was drafted by the Treasury.
Members of the Virtual Asset Chamber of Commerce (VACC), a Blockchain lobby group, met officials from the National Treasury during a consultative workshop at the Lake Naivasha Crescent Hotel earlier this year, where they raised concerns about the vague provisions in the proposed bill from 2024. The new bill attempts to iterate the preceding draft but it is unclear whether it will satisfy the industry’s stakeholders.
In the new bill, Kenya has dropped a key enforcement clause that had imposed fines of KSh 150,000, plus KSh 15,000 for each day of noncompliance, on firms that failed to grant authorities real-time, read-only access to transaction records. While the obligation to provide access remains, the penalty for ignoring it has vanished. Regulators can still suspend or revoke licenses for violations, but there is now no explicit financial penalty.
Ichung’wa’s Virtual Asset Service Providers Bill places wallet and custodial services firmly under the CBK while investment and exchange functions now fall under the Capital Markets Authority. This split intends to ameliorate the overlapping roles of the two regulators as observed in the previous draft.
Unlike the 2024 draft that mentioned tokenization under the Capital Markets Authority, the latest version introduces formal licensing for “Token Issuance Platforms.” These platforms will facilitate the creation and secondary trading of digital tokens backed by real-world assets like real estate, art, and commodities. The move signals a broader push to open capital markets to retail investors through blockchain-based infrastructure.
Kenya’s new crypto bill also formally recognizes stablecoins and initial coin offerings (ICOs), providing clear definitions and supervisory roles for both instruments. These were not even explained in the 2024 draft.
Under the proposed law, the CBK will regulate stablecoins, marking a shift toward embracing digital assets tied to fiat currencies. On the flip side, the Capital Markets Authority (CMA) will oversee ICOs, placing them under an existing scrutiny model for securities.
The Virtual Asset Service Providers Bill, 2025, would compel crypto platforms operating in Kenya to comply with the Financial Action Task Force’s ‘Travel Rule’, a global anti-money-laundering measure that demands providers identify both the sender and receiver in crypto transactions.
The Paris-based task force has flagged virtual assets as a high-risk area for illicit financial flows but this is a controversial requirement in crypto circles because it is a violation of privacy, an integral lynchpin of the asset’s existence.
