Kenya’s National Treasury has introduced draft regulations seeking to revamp the oversight and licensing of virtual asset service providers (VASPs) in a bid to tighten control over the nation’s burgeoning cryptocurrency sector. These proposed regulations are open to public consultation until April 10, with the new legal structure set to be enforced under the Virtual Asset Service Providers Act from November 2025.
What’s Driving the New Regulations?How Will Licensing and Oversight Evolve?
What’s Driving the New Regulations?
The fresh regulatory initiatives come after Kenya was flagged on the Financial Action Task Force (FATF) “grey list” in early 2024. This has highlighted deficiencies in the country’s mechanisms to combat money laundering and terrorist financing. To tackle these issues, the National Treasury has collaborated with entities such as the Central Bank of Kenya and the Capital Markets Authority.
How Will Licensing and Oversight Evolve?
A significant change in the draft is the expanded eligibility for VASP licenses, which now includes limited liability partnerships, enhancing the previous company-only restriction. The response time for licensure applications is capped at 90 days, with licenses valid for 12 months from issue, a departure from the old fixed annual expiry system.
Another crucial development is that all VASPs must maintain a bank account locally, emphasizing increased domestic financial oversight. The definition of virtual assets is broadened to include any digital value representation, even if they don’t use cryptographic security.
Furthermore, the scope of who qualifies as an issuer is enlarged, affecting entities involved in creating or distributing digital assets. Regular system audits every two years are also mandated, with certified IT auditors assessing key aspects like cybersecurity.
Regarding stablecoins, stringent reserve mandates are introduced, requiring at least 30% of funds to be held in local banks. The remainder can only be used in conservative investments. This aims to guarantee liquidity and secure domestic reserve custody.
“It’s crucial that we focus on domestically held secure assets to boost stability,” noted local journalist Julians Amboko.
Additionally, the draft enforces a 0.05% transaction fee for parties in token issuance on digital platforms, with a separate 0.5% levy on total funds raised through virtual asset offerings. These fees are intended to generate sector revenue and ensure fair market participation.
By pursuing these strategic reforms, Kenya appears committed to advancing a robust and transparent crypto market framework that addresses international concerns and promotes local economic security.
