Protecting the Local Market
Cryptocurrency exchanges and Kenya’s National Treasury are reportedly locked in a standoff over a proposed regulation that would force stablecoin issuers to hold a significant portion of their reserves in local banks. According to a report, the rule requires crypto exchanges to hold at least 30% of all funds received for stablecoins issued in dedicated accounts across commercial banks in Kenya.
The Treasury’s proposal is said to be aimed at insulating Kenya’s financial ecosystem from the volatility of the digital asset markets, protecting local investors, and ensuring that stablecoins operating within the country have concrete, domestic liquidity.
However, digital currency players argue the 30% local reserve mandate is too restrictive and clashes with the decentralized nature of global crypto platforms. Industry representatives warn that locking up nearly a third of their reserves in Kenyan commercial banks could choke operational liquidity, slow transaction speeds, and increase costs for consumers who use stablecoins for cross-border trade and remittances.
The dispute comes amid an ongoing push by Kenyan regulators to bring the rapidly growing digital asset sector into the formal regulatory fold. While the National Treasury views the local banking buffer as a necessary guardrail against potential consumer losses, crypto platforms contend that alternative global custodial frameworks are better suited to manage stablecoin stability.
The standoff has not halted discussions. Crypto industry leaders in Kenya are pushing for continued engagement with regulators, stating that a collaborative approach is necessary to balance investor protection with sector growth.
No deadline has been finalized for the draft rules as consultations between state financial regulators and sector stakeholders continue.
