Kenya is edging closer to formally integrating virtual assets into its financial system, as policymakers, banks, and industry players align around a new regulatory framework set to redefine the country’s digital finance landscape.
- •At the inaugural session of The Kenyan Wall Street’s Board of Trailblazers, stakeholders convened to examine the implications of the Draft Virtual Asset Service Providers (VASP) Regulations, 2026, which operationalize the VASP Act of 2025.
- •The National Treasury has already released the draft regulations, kicking off a nationwide public participation process running from March 30 to April 10, 2026.
- •The final framework is expected by the first or second quarter of 2026.
A defining feature of the proposed regime is its dual regulatory oversight:
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The Central Bank of Kenya will license and supervise wallet providers, payment processors, and stablecoin issuers.
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The Capital Markets Authority will oversee exchanges, brokers, fund managers, tokenization platforms, and Initial Coin Offerings (ICOs).
Notably, the regulations apply broadly to any entity offering virtual asset services “in or from Kenya,” even without a physical presence—signaling an intent to capture cross-border digital activity.
High Entry Bar for Market Participants
The draft rules introduce stringent licensing requirements aimed at safeguarding the financial system. Applicants must pass “fit and proper” tests, disclose sources of funds, and submit detailed operational and cybersecurity frameworks.
They also impose significant minimum capital thresholds:
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Stablecoin issuers: KSh 500 million
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Exchanges: KSh 150 million
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Wallet providers: KSh 150 million
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Tokenization and ICO providers: KSh 200 million
These requirements position the sector for institutional-grade participation but may limit entry for smaller startups.
Tokenization and Stablecoins Move to the Forefront
The regulations provide one of the clearest frameworks yet for real-world asset tokenization, enabling physical assets such as real estate or art to be digitized and potentially used as collateral. Issuers will be required to provide independent valuations, custodial arrangements, and detailed disclosures through white papers.
At the same time, stablecoins—highlighted during the forum as a critical tool for emerging markets—will face strict rules. Issuers must maintain 100% reserves in cash or short-term government securities, ensure redemption at par value without fees, and are barred from offering interest.
Tether, a key participant in the dialogue, pointed to the growing role of USDT—now exceeding $184 billion in circulation—in facilitating cross-border payments, remittances, and access to dollar liquidity.
Banks Urged to Engage or Risk Falling Behind
Despite the progress, a key concern remains: Kenyan banks have largely stayed on the sidelines due to regulatory ambiguity, often declining to onboard crypto-related businesses. This has pushed capital flows into offshore channels, limiting domestic value capture.
The forum issued a direct challenge to the Kenya Bankers Association and individual institutions to actively participate in shaping the final regulations during the ongoing public consultation phase.
A Narrow Window for Leadership
Global projections estimate that $19.5 trillion in assets could be tokenized by 2030—yet current penetration at just 0.1%.
If implemented effectively, the VASP Regulations could unlock new capital markets, expand access to credit through tokenization, and position the country as a leading hub for regulated digital finance in Africa.
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