Legislation concerning virtual asset service providers presented to Kenyan legislators for consideration
Kenya Establishes Comprehensive Regulatory Framework for Virtual Asset Service Providers (VASPs)
Kenya has taken a significant step towards regulating the virtual asset industry by establishing a comprehensive framework for VASPs. The Virtual Asset Service Providers (VASP) Bill, submitted to the National Assembly on April 4, 2025, is expected to become law by the end of July 2025.
The legislation introduces formal licensing requirements, anti-money laundering (AML) and counter-terrorist financing (CFT) measures, and defines operational standards to legitimize virtual asset services in the country. The Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK) share regulatory roles, with the CMA responsible for licensing VASPs and the CBK also playing a supervisory role in certain cryptocurrency activities.
The mandatory licensing by CMA and CBK includes capital requirements and operational standards to provide clarity and build investor confidence. This licensing regime aims to eliminate legal grey areas that hinder innovation or discourage engagement by traditional financial institutions.
Kenya’s legal framework aligns AML/CFT measures with global standards, notably the Financial Action Task Force (FATF) Recommendations, to mitigate terrorist financing and money laundering risks associated with virtual assets. The VASP Bill incorporates a practical taxation framework by imposing a 10% excise duty on service fees/commissions earned by VASPs, replacing an earlier proposed digital asset tax that proved unworkable.
The Kenyan Capital Markets Association (CMA) plays a pivotal role in granting licenses and overseeing compliance for VASPs alongside the Central Bank of Kenya (CBK), which is instrumental in supervising the broader financial system and payment platforms. This dual oversight aims to foster a regulated, innovative environment reminiscent of Kenya’s leadership in mobile money (e.g., M-Pesa), with Kenya positioning itself as a future crypto hub in Africa through this regulatory clarity.
Under the new legal regime, only licensed entities can issue initial coin offerings (ICOs). Licensed VASPs must collect user information and share it with relevant government agencies. They are also required to open physical offices in Kenya and implement AML/CFT measures.
Other African countries, such as Morocco and Ghana, are still in the process of creating legal rules to guide crypto usage. South Africa is the most advanced African country in the process of licensing VASPs, having issued more than 240 licenses.
As of mid-2025, Kenya’s VASP regulatory framework is characterised by:
| Aspect | Status in Kenya 2025 | Regulatory Bodies | |--------------------------|--------------------------------------------------------------|-------------------------------| | Licensing requirements | Mandatory licensing by CMA and CBK with capital & operational thresholds | Capital Markets Authority, Central Bank of Kenya | | AML/CFT measures | Aligned with FATF Recommendations designed to reduce illicit use | Integrated under VASP Bill and national AML laws | | Taxation | 10% excise duty on VASP fees/commissions (replacing DAT) | Kenyan legislature and tax authorities | | Role of CMA | Licensing, regulation, investor protection | Capital Markets Authority | | Role of CBK | Supervisory role over payment systems and financial stability | Central Bank of Kenya |
This framework reflects Kenya’s balanced approach between fostering innovation and ensuring financial security and international compliance as the country embraces digital asset ecosystems. The Kenyan government has started talks with stakeholders in the Kenyan crypto industry towards the establishment of actual crypto regulations, but the bill does not specify a date for the implementation of these regulations.
- Kenya's comprehensive regulation of the virtual asset industry, through the VASP Bill, includes licensing requirements for Virtual Asset Service Providers (VASPs) by the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK).
- The new regulation in Kenya aligns its anti-money laundering (AML) and counter-terrorist financing (CFT) measures with global standards, such as the Financial Action Task Force (FATF) Recommendations.
- Following the establishment of this regulatory framework, only licensed entities will be able to issue initial coin offerings (ICOs) in Kenya.
- Kenya's VASP regulatory framework also imposes a 10% excise duty on service fees/commissions earned by VASPs, replacing an earlier proposed digital asset tax.
- The Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK) share regulatory responsibilities, with the CMA granting licenses and overseeing compliance, and the CBK supervising the broader financial system and payment platforms.
- Other African countries, such as Morocco and Ghana, are still in the process of creating legal rules to guide crypto usage, while South Africa is the most advanced African country in licensing VASPs, having issued over 240 licenses.
