Kenya Parliament recently passed the Virtual Asset Service Providers Bill, a framework designed to govern cryptocurrencies, stablecoins, and virtual asset service providers. The legislation, now awaiting presidential assent, positions Kenya as one of the first African countries to formally regulate digital assets, an effort aimed at attracting global investment while curbing illicit financial activity.
The Bill is intended to “boost investments and protect consumers,” while Modern Diplomacy describes it as a “gateway to unlocking billions in digital capital and innovation.” The move signals Kenya’s ambition to formalise its fast-growing crypto sector, which has thrived for years in regulatory ambiguity.
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By taking this step, Kenya joins a growing list of nations crafting laws to align digital finance with global financial integrity standards. The timing could not be more strategic, as cryptocurrencies increasingly influence cross-border payments, remittances, and investment flows across Africa.
Across the world, the question of how to regulate digital assets remains one of the most complex policy debates of the decade. Many governments are seeking to strike a balance between fostering innovation and protecting financial systems from misuse.
The Financial Action Task Force (FATF) set the tone through its Recommendation 15, which compels countries to regulate virtual asset service providers under anti-money laundering and counter-terrorism financing frameworks. The European Union’s Markets in Crypto-Assets (MiCA) law, which came into full effect in 2024, further advanced this agenda by requiring licensing, risk disclosure, and consumer protection.
Kenya’s new framework aligns with this global movement. By providing a structured licensing regime, mandatory transparency standards, and strong consumer safeguards, the country aims to foster a responsible yet innovative digital finance ecosystem.
At the heart of the new law is an ambition to bring order to a fast-growing sector. The legislation introduces a mandatory licensing system for all firms and platforms dealing in virtual assets, including crypto exchanges, digital wallet providers, token issuers, and custodial services.
The Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) have been designated as the key regulators. The CBK will supervise stablecoins and virtual currencies that could impact monetary stability, while the CMA will oversee trading platforms, exchanges, and firms providing investment-related services.
Companies operating in the digital asset space must demonstrate sufficient capital, cybersecurity infrastructure, and compliance with anti-money laundering (AML) and consumer protection standards before being granted a licence. Firms will also be required to maintain segregated client accounts, ensuring that investors’ assets are protected even in cases of insolvency.
The Bill establishes a comprehensive framework to guide the conduct of all virtual asset service providers. It provides that no individual or entity shall operate a digital asset business in or from Kenya without a valid licence issued under the new law. The objective is clear, to bring an informal and fast-growing market under structured oversight, while safeguarding users and investors.
Before obtaining a licence, companies must demonstrate adequate capital, a sound governance structure, and robust cybersecurity systems. They must also show compliance with Kenya’s anti-money laundering and data protection regulations. The Bill further mandates that licensed operators maintain segregated accounts for customer funds to protect investors’ assets in the event of insolvency.
The legislation provides for heavy penalties against unlicensed operations or breaches of compliance, including monetary fines and imprisonment, reinforcing the seriousness of the country’s new digital asset regime.
Guarding Against Financial Crime and Cyber Threats
One of the Bill’s strongest features lies in its firm stance on financial integrity. Every licensed operator will be required to comply with Kenya’s anti-money laundering and counter-terrorism financing regulations, under the supervision of the Financial Reporting Centre (FRC) and other enforcement agencies.
The law empowers regulators to vet company directors and beneficial owners, inspect operations, and suspend licences for non-compliance. It also mandates comprehensive record-keeping, enabling authorities to track transactions and identify suspicious activity in real time.
These measures align Kenya with FATF’s international standards, which many countries have struggled to implement in the decentralised crypto economy. By bringing the digital asset market into formal oversight, Kenya hopes to reduce its vulnerability to illicit financial flows — a major concern for governments worldwide.
Cybersecurity is another critical element. The law requires service providers to establish robust digital defences and risk management frameworks in line with the Computer Misuse and Cybercrimes Act. With global crypto-related hacking losses exceeding $1.7 billion in 2024, such provisions are essential to safeguard consumer funds and public confidence.
Kenya’s fintech ecosystem has long been a source of continental pride. Platforms like M-Pesa, BitPesa, and emerging blockchain startups have made the country a testing ground for Africa’s financial innovation. But until now, the lack of regulatory clarity has kept most crypto ventures in the informal economy.
With this new law, that is about to change. Legal recognition is expected to unlock new funding channels, encourage partnerships between crypto firms and traditional banks, and create an environment where innovation can flourish responsibly.
Analysts project that Kenya’s fintech industry, currently valued at around $1.2 billion, could expand significantly as confidence grows among both local and foreign investors. The Bill’s requirement for clear governance, audits, and consumer disclosures is likely to attract institutional participation and foreign venture capital, particularly from Europe and the Gulf states.
However, the legislation also introduces compliance costs that may challenge smaller startups. Policymakers will need to strike a balance between maintaining high regulatory standards and supporting innovation at the grassroots level.
Putting Consumers at the Centre
For everyday Kenyans, the most tangible benefit of the new framework is its focus on consumer protection. The Bill mandates service providers to act with fairness, diligence, and transparency in all dealings. They must also disclose the risks of trading in virtual assets and maintain clear dispute resolution mechanisms.
Investors’ funds will be protected through segregation of accounts, preventing them from being used for corporate expenses or at risk in the event of bankruptcy. Providers are further required to keep accurate transaction records for a minimum of seven years, ensuring that regulators can access audit trails when investigating misconduct.
These measures are designed to restore confidence after years of speculation and scams that have affected retail investors across Africa. By treating crypto transactions with the same seriousness as formal financial operations, Kenya hopes to cultivate trust in digital finance as a legitimate and secure investment space.
The Nigeria’s Example
Kenya’s approach stands in sharp contrast to Nigeria’s earlier experience. In 2021, the Central Bank of Nigeria banned banks from facilitating crypto transactions, citing risks to financial stability. That decision drove trading underground, leading to a peer-to-peer market estimated at over $50 billion between 2021 and 2023, according to Chainalysis.
By 2023, Nigeria reversed course. It introduced new guidelines allowing banks to open accounts for licensed crypto firms and recognised digital assets under its Investments and Securities Act 2025. The shift reflected a broader understanding that regulation, not prohibition, offers a more sustainable path forward.
Kenya appears to have learned from this experience. Instead of reacting to a crisis, it has moved proactively to create a stable regulatory foundation before large-scale adoption. This foresight could make Nairobi a regional leader in digital finance, setting a precedent for other East African and continental economies.
Implementation and Impact
The real test for Kenya’s new framework will be in its implementation. The Bill provides a transitional period for existing operators to comply with the new regulations and obtain licences. During this period, the CBK and CMA will develop operational guidelines, fee structures, and inspection mechanisms.
Success will depend on effective coordination among regulators, law enforcement agencies, and industry stakeholders. Clear communication, transparency, and regular consultation with fintech innovators will be essential to ensure compliance without stifling growth.
If implemented efficiently, the law could transform Nairobi into East Africa’s financial technology hub, attracting blockchain startups, investment platforms, and stablecoin projects that thrive within a trusted regulatory environment.
A Law for the Digital Future
Kenya’s Virtual Asset Service Providers Bill represents more than just financial regulation — it marks a cultural shift toward responsible innovation. It demonstrates that Africa’s digital future can be bold without being reckless, and that trust and technology can coexist under the rule of law.
If the country successfully enforces the framework, it will not only secure its place as East Africa’s fintech capital but also strengthen Africa’s voice in the global digital economy.
In a world where finance is increasingly coded in algorithms, Kenya’s new law offers a message of balance: progress with protection, innovation with integrity, and ambition guided by accountability.
