Kenya is set to introduce its first comprehensive legislation aimed at regulating the cryptocurrency sector through the newly proposed Virtual Assets Service Providers (VASP) Bill.
This marks a decisive step by the government to bring clarity and control to a fast-growing but largely unregulated part of its financial system.
The bill, spearheaded by the National Treasury, introduces a structured framework requiring all virtual asset providers — including exchanges and wallet services — to be licensed by designated regulators such as the Central Bank of Kenya and the Capital Markets Authority.
Beyond licensing, the legislation enforces compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) standards, introduces mandatory consumer protection provisions, and requires service providers to uphold strong cybersecurity standards.
This regulatory effort reflects Kenya’s intent to exert oversight over digital currencies, a sector that has so far operated in a legal grey area.
More importantly, it speaks to a growing concern among authorities over financial stability, potential misuse for illicit activity, and the protection of consumers who are increasingly drawn to crypto assets for their promise of fast, borderless, and low-cost transactions.
For fintech startups, particularly those experimenting with or integrating stablecoins into their offerings, the proposed legislation could significantly impact how they operate. Companies like Kotani Pay, which uses stablecoins to provide remittance and cross-border services for underbanked populations, may need to reassess their business models to ensure compliance.
While this could introduce new operational costs and regulatory burdens, it also presents an opportunity for legitimisation within the financial ecosystem — one that may increase user trust and attract institutional partnerships.
Startups will now need to engage more deliberately with regulatory bodies to ensure their innovations align with national policy. In turn, regulators will be expected to match pace with innovation, crafting policies that support growth without stifling the agility that defines fintech.
Kenya’s move mirrors a broader shift across Africa, where countries are increasingly grappling with the dual challenge of supporting digital innovation while mitigating financial risks.
Just last year, Nigeria’s central bank moved to develop its own stablecoin, cNGN, signalling a continental trend toward formalising digital currency use. This bill could position Kenya as a leader in crypto regulation on the continent.
By being among the first to draft legislation specifically targeting stablecoins, Kenya is setting a precedent that other African nations may follow. If successfully implemented, the framework could encourage responsible innovation while making Kenya a more attractive base for crypto-related ventures.
