Lawmakers have passed the Virtual Asset Service Providers Bill, 2025, creating the country’s first comprehensive framework for licensing and supervising cryptocurrency businesses, but only after gutting a controversial provision that would have given a Binance-linked lobby group a seat on the national regulator.
- •The approved bill establishes a multi-agency oversight model that places cryptocurrency supervision under existing institutions such as the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA), rather than a new standalone Virtual Assets Regulatory Authority (VARA).
- •That marks a decisive break from the earlier draft, which explicitly stated that a new regulator would be formed, featuring board representation from the Virtual Asset Chamber of Commerce (VACC), a private policy group accused by crypto startups of acting as a proxy for global exchange Binance.
- •In June, The Kenyan Wall Street reported that crypto startups had raised alarm over what they described as an attempt by the VACC to “capture” the proposed regulator through a draft retainer agreement with Binance.
By the time the Bill reached Third Reading, Parliament had struck out the entire clause establishing a separate Virtual Assets Regulatory Authority, replacing it with a coordinated licensing model where existing regulators will be prominent.
However, under the same clause, the Treasury still holds the power to re-establish the authority if need arises. This structure also reflects concerns raised by the Financial Sector Regulators Forum, which warned that duplicating mandates would cause legal ambiguity and slow enforcement.
Navigating the Gray List
Despite opposition from some stakeholders, the crypto law has retained the provision requiring all licensed virtual-asset providers to maintain a physical office in the country and appoint a board of at least three natural-person directors.
The move aims to curb shell operations and improve accountability in a sector long dominated by offshore entities with little local presence. Lawmakers said the rule would give authorities clearer oversight and ensure decision-makers can be held legally responsible in Kenya. However, some crypto stakeholders challenged the provision stating that physical offices are not exigent to their operations.
The new regime allows Kenya to align with global AML/CFT standards while avoiding bureaucratic expansion. Under the law, all virtual-asset firms must obtain licenses from the relevant regulator, segregate customer assets and hold accounts in Kenyan banks, appoint compliance officers and undergo independent IT audits, and implement detailed anti–money-laundering and data protection frameworks.
During stakeholder submissions, proposals were made to introduce a recognition framework for foreign-licensed stablecoins, allowing entry only from vetted jurisdictions and subject to strict reserve, audit, and custody rules. Based on these rules, issuers must maintain 100% collateral, use licensed Kenyan custodians, and ensure full liquidity for redemptions.
However, the final bill does not delve into stablecoins in detail as many stakeholders would have intended. It is regarded as a virtual asset subject to the same standards as other crypto assets. This can be viewed as a cautious attempt by the bill to integrate digital currencies into the local financial system.
Licenses will be renewable annually and can be revoked for misconduct, while some violations carry fines of up to KSh 25 million or five years in prison. Existing operators have a 12-month grace period to meet the new standards.
Regulators have been empowered to scale punishments based on the severity of violations and the profits made from them, while retaining powers to act swiftly when investors face imminent harm. The goal is a more predictable system that encourages compliance without stifling innovation.
The Bill now awaits presidential assent before becoming law. Once signed, Kenya will join a small group of African countries, alongside South Africa and Mauritius, with full-fledged crypto regulatory frameworks that meet global standards.
