Treasury Proposes New Rules to Regulate Kenya’s Crypto Industry Under 2026 VASP Regulations

Treasury Proposes New Rules to Regulate Kenya’s Crypto Industry Under 2026 VASP Regulations

Kenya is moving to formally regulate its rapidly expanding cryptocurrency sector after the National Treasury unveiled draft Virtual Asset Service Providers (VASP) Regulations 2026 aimed at tightening oversight of digital asset businesses.

In a public notice issued on Tuesday, March 17, the ministry outlined a comprehensive framework for licensing, supervising, and monitoring crypto-related firms operating within or from Kenya. The proposed rules target exchanges, digital wallet providers, token issuers, and other intermediaries in the virtual asset ecosystem.

Officials say the regulations are intended to protect consumers, prevent financial crimes such as money laundering and fraud, and bring clarity to a sector that has grown rapidly with minimal formal oversight.

“The Regulations are issued pursuant to the Virtual Asset Service Providers Act, 2025… to provide for the legal framework for licensing and regulating the activities of Virtual Asset Service Providers in and from Kenya,” the notice stated.

Strict Licensing Requirements

Under the draft framework, only locally incorporated companies will qualify for full licensing. Foreign firms seeking to operate in Kenya must first obtain a compliance certificate demonstrating adherence to local laws before applying for authorization.

Licensed providers will be required to maintain a physical office within the country, signaling a shift away from purely online operations. Directors and senior managers must also undergo background checks and competence assessments to ensure they meet regulatory standards.

Analysts say these measures aim to improve accountability in a market where anonymous ownership structures and cross-border transactions have previously complicated enforcement.

Safeguards for Customer Funds

The proposed regulations impose strict rules on how digital asset companies handle client money. Issuers would be required to hold reserves in highly liquid, low-risk instruments such as cash, central bank deposits, short-term government securities with maturities of no more than 90 days, and repurchase agreements lasting no more than seven days.

Stablecoin issuers—firms that issue digital tokens pegged to traditional currencies—would face additional safeguards. At least 30 percent of customer funds must be kept in segregated accounts at Kenyan commercial banks, with the remainder invested in high-quality liquid assets with minimal exposure to market or credit risks.

These provisions are designed to ensure that users can redeem their funds even during periods of market volatility.

New Fees and Restrictions

The draft rules also introduce financial obligations for digital asset platforms. Token issuance platforms would pay a transaction fee of 0.05 percent on each trade, shared by both parties. Entities seeking approval for virtual asset offerings would pay a fee equivalent to 0.5 percent of the value of a successful offering.

Additionally, the regulations prohibit certain high-risk activities, including transactions designed to conceal the identity of participants—an apparent move to curb illicit financial flows and comply with global anti-money laundering standards.

High Adoption Drives Urgency

Kenya is widely considered one of Africa’s most active cryptocurrency markets, fueled by widespread mobile money use and a young, technologically savvy population. Virtual assets are increasingly used for remittances, online commerce, and investment.

However, the absence of clear regulations has raised concerns about consumer protection, fraud, and systemic risks to the financial sector. Authorities hope the new framework will foster innovation while minimizing vulnerabilities.

Public Consultation Underway

To gather feedback, the Treasury has opened a public participation process across major urban centers including Nairobi, Mombasa, Kisumu, and Eldoret. Stakeholders, industry players, and members of the public have been invited to submit written comments and attend consultation forums.

Officials say the consultation period will run through April, after which submissions will be reviewed before the regulations are finalized.

If adopted, the VASP Regulations 2026 would mark a significant turning point for Kenya’s digital finance landscape, potentially reshaping how crypto businesses operate while positioning the country as a regulated hub for virtual asset innovation in Africa.

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Treasury Proposes New Rules to Regulate Kenya’s Crypto Industry Under 2026 VASP Regulations