Kenya’s crypto regulatory landscape reached a significant milestone as the Virtual Asset Service Providers (VASP) Bill passed the assembly stage, moving closer to becoming law. This legislation aims to bring clarity, oversight, and structure to Kenya’s fast-growing but previously unregulated cryptocurrency market. At the same time, new rules introduced by the bill could profoundly shape the future of Kenya’s digital asset sector, potentially bolstering innovation or imposing constraints that might challenge smaller players.
Background and Legislative Progress
The VASP Bill, passed by Kenya’s National Assembly committee stage on October 2, 2025, now awaits a third reading before being presented to President William Ruto for assent. It is Kenya’s first comprehensive framework to regulate virtual assets and service providers, including cryptocurrency exchanges, wallet providers, and other related entities. This marks a pivotal shift from a largely unregulated market that has operated in legal uncertainty to a jurisdiction positioned as East Africa’s most progressive for digital asset regulation.
Acknowledging Kenya as one of Africa’s top five largest crypto markets, the bill aims to attract investment and innovation by providing legal certainty while addressing concerns over financial stability, consumer protection, and illicit finance risks such as money laundering and terrorism financing.
Key Provisions and Regulatory Framework
The bill establishes the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) as the primary regulators overseeing virtual assets, sharing supervision responsibilities. It also empowers the Treasury Secretary to issue subsidiary regulations governing critical aspects such as stablecoin issuance, tokenization of real-world assets, trading platform operations, capital and solvency requirements, cybersecurity, advertising standards, and anti-money laundering (AML) compliance.
Kenya’s approach to regulation emphasizes a controlled environment that can safeguard consumers while enabling innovation. Service providers must obtain licenses, comply with AML and counter-financing terrorism (CFT) standards, and meet cybersecurity and consumer protection requirements under the law. The VASP Bill’s enactment will effectively legitimize an industry processing an estimated $105.6 billion annually, signaling Kenya’s ambition to become a leader in crypto adoption in Africa.
Market Reactions and Potential Impact
The crypto community in Kenya has shown mixed reactions. While the bill’s passage is welcomed as a step toward formalizing and legitimizing the market, concerns remain about the potential regulatory burden on smaller players and startups. Critics warn that the legislation may entrench domination by a few major firms — notably Binance, which has financial ties to the Virtual Asset Chamber of Commerce (VAC), a body heavily involved in lobbying for the bill. Some smaller virtual asset service providers (VASPs) fear the new rules could create barriers that stifle competition and hinder innovation, skewing the market in favor of large players.
The VAC’s close links to Binance have sparked debate about a possible regulatory capture, where the interests of dominant firms overshadow smaller innovators. This dynamic raises questions about fairness and market diversity under the new regime.
Taxation Shifts and Financial Implications
Complementing the legislative changes, Kenya’s parliament repealed a controversial 3% digital asset tax on the gross value of crypto transactions earlier in 2025, replacing it with a 10% excise duty on transaction fees charged by exchanges. This move eased pressure on crypto traders and companies, as the original tax was seen as punitive and potentially detrimental to market growth. The new excise duty, effective as part of the 2025 finance bill, is considered a more balanced fiscal approach to generate revenue without stifling activity.
Comparison to Regional Trends
Kenya’s regulatory advancements align with broader African trends. South Africa has licensed hundreds of crypto service providers under a regulated framework, Nigeria has introduced a licensing sandbox and tax strategies for digital assets, and Mauritius enforces Financial Action Task Force (FATF)-aligned crypto rules. The VASP Bill positions Kenya alongside these jurisdictions as a regional leader in establishing robust, transparent crypto market governance.
Consumer Protection and Market Integrity
The bill also targets market integrity threats such as pump-and-dump schemes and scams by enhancing regulatory authority and oversight. With mandatory licensing and clear AML/CFT guidelines, Kenya aims to protect investors and users from fraud and financial losses common in unregulated environments. Consumer protection, cybersecurity mandates, and advertising standards are integral components designed to instill confidence in the growing digital asset ecosystem.
Outlook and Next Steps
The bill will undergo a final reading in the National Assembly before being forwarded to President Ruto for assent. Upon enactment, detailed subsidiary regulations from the Treasury will unfold, setting out operational requirements and compliance protocols for the sector. The evolving regulatory framework will shape how fintech startups—particularly those leveraging stablecoins and blockchain technology for remittances and financial inclusion—adapt their business models to meet compliance standards while remaining competitive.
Kenya’s progressive stance in regulating crypto markets reflects a pragmatic balancing act: fostering innovation and growth while imposing necessary oversight to safeguard financial stability and protect consumers. However, the success of the bill depends heavily on implementation detail, regulatory fairness, and the ability to create a level playing field accommodating both large multinational players and indigenous fintech startups.