What Is Kenya Proposing for Virtual Asset Firms?

Kenya’s National Treasury has released draft regulations for virtual asset service providers, outlining a licensing framework, reserve requirements for stablecoins, and transaction-based fees for crypto platforms. The rules are open for public comment until April 10 as part of a broader effort to formalize oversight of the country’s digital asset sector.

The proposed 2026 regulations sit under the Virtual Asset Service Providers Act, which came into force in November 2025. They follow a regulatory push that has accelerated since Kenya was placed on the Financial Action Task Force grey list in February 2024, with authorities under pressure to strengthen anti-money laundering and counter-terrorism financing controls.

The draft was developed through a multi-agency process involving the National Treasury, the Central Bank of Kenya, and the Capital Markets Authority, reflecting an attempt to align financial regulation, monetary policy, and market supervision within a single framework.

Investor Takeaway

Kenya is moving toward a structured crypto regime that prioritizes local banking integration, reserve discipline, and transaction-level oversight, raising compliance costs but improving regulatory clarity.

How Do the Stablecoin Reserve Rules Work?

The draft introduces clear reserve requirements for stablecoin issuers operating in Kenya. Issuers would need to hold at least 30% of customer funds in segregated accounts at commercial banks domiciled in the country. The remainder must be allocated to low-risk assets classified as high-quality liquid assets within Kenya.

Eligible reserve assets are tightly defined. They include cash, central bank reserve deposits, bank deposits, short-term government securities with maturities of 90 days or less, and repurchase agreements with maturities capped at seven days when backed by cash or central bank deposits.

This structure limits exposure to longer-duration or offshore instruments and anchors stablecoin backing within the domestic financial system. It also reduces flexibility for issuers that rely on diversified or higher-yield reserve strategies, effectively trading return potential for liquidity and oversight.

What Fees and Licensing Changes Are Included?

The draft introduces transaction-based fees across different parts of the crypto ecosystem. Token issuance platforms would face a 0.05% fee per transaction, payable by each counterparty. Initial virtual asset offerings would carry a proposed levy of 0.5% of the value of a successful raise.

Licensing rules have also been expanded. Eligibility would extend beyond companies to include limited liability partnerships, widening the pool of entities that can apply. Regulators would have 90 days to respond to license applications, and approvals would remain valid for 12 months from the date of issuance rather than expiring at the end of the calendar year.

The definition of a virtual asset is also broadened to include digital representations of value tied to real-world assets, whether secured cryptographically or not. At the same time, the definition of an issuer now covers any entity or individual that creates or distributes crypto-assets to the public, including through ongoing issuance mechanisms.

Investor Takeaway

Transaction fees and expanded licensing rules suggest Kenya is treating crypto platforms as regulated financial infrastructure rather than informal marketplaces.

What Operational Requirements Will Firms Face?

The draft requires all virtual asset service providers to open and maintain a bank account within Kenya, reinforcing the link between crypto activity and the domestic banking system. It also mandates system audits every two years, to be conducted by certified IT auditors.

These audits would cover digital infrastructure, data protection, transaction integrity, cybersecurity readiness, and operational resilience. The requirement introduces an additional compliance layer for firms, particularly smaller operators that may need to upgrade systems to meet audit standards.

Public participation is part of the process before finalization. The National Treasury has scheduled consultation forums across multiple cities, including Nairobi, Mombasa, Kisumu, and Nakuru, indicating a broad-based approach to gathering feedback from market participants and stakeholders.

Why This Matters for Kenya’s Crypto Market

The draft rules reflect a shift from informal crypto activity toward a structured regulatory environment tied closely to domestic financial institutions. Reserve requirements, local banking mandates, and audit obligations all point toward tighter integration with the traditional financial system.

For crypto firms, the framework introduces clearer operating conditions but also higher compliance thresholds. For regulators, it provides tools to monitor flows, enforce standards, and respond to international pressure tied to financial crime controls.

The consultation period will determine how much of the draft survives in its current form, but the direction is clear: Kenya is building a rule-based system for digital assets that prioritizes oversight, liquidity safeguards, and local accountability.