As the world continues its march into the digital age, Kenya has taken a bold step toward regulating one of the most transformative yet contentious sectors of the modern economy—cryptocurrencies and virtual assets. The Virtual Asset Service Providers (VASP) Bill, 2025, currently under parliamentary consideration, represents a watershed moment in aligning Kenya’s financial sector with global trends in digital finance, blockchain technology, and crypto regulation. The Bill provides a detailed legal framework for the regulation of virtual assets, including cryptocurrencies, tokenized securities, and digital payment infrastructure.
By offering legal certainty, consumer safeguards, and institutional oversight, the Bill aims to unlock innovation, boost investor confidence, and position Kenya as a regional hub for digital finance and blockchain-based services.
Background and Legislative Intent
The VASP Bill, 2025, is Kenya’s first comprehensive legislative framework intended to regulate activities involving virtual assets such as cryptocurrencies, digital tokens, and other blockchain-based assets. The Bill seeks to:
- Combat money laundering and terrorism financing risks associated with unregulated crypto activities.
- Establish a licensing and supervisory regime for Virtual Asset Service Providers.
- Foster innovation in financial technologies (FinTech) while ensuring consumer protection and market integrity.
This legislative push follows global trends led by the Financial Action Task Force (FATF), which recommends that all countries implement a risk-based approach to the supervision of VASPs.
Key Definitions in the Bill
- Non-fungible Token: A unique digital identifier recorded on a blockchain and used to certify ownership and authenticity.
- Virtual Asset (VA): A digital representation of value that can be traded, transferred, or used for payment or investment purposes but does not have the status of legal tender.
- Virtual Asset Service Provider (VASP): Any individual or entity providing exchange services between virtual assets and fiat currencies, transfer of virtual assets, safekeeping, and participation in financial services related to virtual assets.
- N.B VASPs must be local companies or foreign companies with compliance certificates under the Companies Act. Natural persons are barred from operating VASPs.
- Virtual Service Token: means a digital representation of value which is not transferable or exchangeable with a third party at any time and includes digital tokens whose sole function is to provide access to an application or service or to provide a service or function directly to its owner;
Regulatory Framework: Who’s in Charge?
The VASP Bill distributes regulatory oversight across three key bodies based on the nature of services provided:
- Central Bank of Kenya (CBK) – Regulates wallet providers, stablecoin issuers, and other payment-based virtual asset services.
- Capital Markets Authority (CMA) – Oversees investment and capital-market-related services, including crypto exchanges, tokenization platforms, and ICOs.
- Communications Authority (CA) – Supervises communication systems, cybersecurity, and technology infrastructure supporting virtual asset services.
The Cabinet Secretary may designate additional authorities where necessary, reflecting the cross-cutting nature of digital finance.
Licensing Requirements: Entering the Market
Eligibility:
- Only legal entities (e.g., limited liability companies) are permitted to operate as VASPs.
- Individual entrepreneurs are not eligible—ensuring institutional accountability.
Licensing Process:
- Prospective VASPs must apply to the relevant regulator depending on their service category.
- Existing service providers have a 6-month transition window from the date of enactment to regularize their status.
Operational Prerequisites:
- Must have a registered office and an active bank account in Kenya.
- Required to appoint a board of directors (minimum of two natural persons) and a CEO with proven qualifications.
- Directors may not simultaneously serve on the boards of multiple VASPs.
Compliance and Operational Standards
To ensure sound business practices and protect end users, licensed VASPs must implement the following:
Financial Soundness:
- Maintain minimum capital adequacy and solvency margins.
- Keep proper books of account and undergo annual audits.
Risk and Cybersecurity:
- Enforce internal risk management protocols, including threat mitigation and incident reporting.
- Establish strong cybersecurity frameworks and data privacy measures, aligned with existing data protection laws.
Consumer Protection:
- Develop dispute resolution mechanisms and transparent communication of terms and conditions.
- Introduce education campaigns to improve public understanding of risks in virtual asset trading.
- The Bill obligates VASPs to ensure transparency in pricing, risk disclosures, terms of service, and to provide avenues for dispute resolution. Misleading promotions and unfair trading practices are expressly prohibited.
AML/CTF Compliance:
- Perform customer due diligence (CDD) and enhanced due diligence (EDD) where necessary.
- Report suspicious transactions in compliance with the Proceeds of Crime and Anti-Money Laundering Act.
Taxation Implications: A Point of Contention
The Bill introduces a 3% Digital Asset Tax (DAT) on all transactions involving virtual assets, regardless of profitability. While the government aims to capture value from this emerging sector, the tax has sparked concern among stakeholders, who argue it could:
- Discourage adoption and innovation.
- Create a competitive disadvantage compared to jurisdictions with more favorable tax regimes.
There may be lobbying and potential revisions as the Bill proceeds through public participation and committee review.
Enforcement and Penalties
The Bill introduces strict penalties to reinforce compliance:
For Unlicensed Operations:
- Individuals: Up to KES 10 million in fines, 10 years imprisonment, or both.
- Corporations: Fines up to KES 20 million.
Regulatory Sanctions:
- Suspension or revocation of licenses.
- Fines and administrative sanctions for operational breaches.
- Disqualification of non-compliant directors or executives.
These provisions aim to deter fraud, ensure professionalism, and strengthen trust in the Kenyan crypto ecosystem.
Opportunities for Investors and Providers
Kenya’s VASP Bill doesn’t just regulate, it opens the door for a structured and globally aligned virtual asset ecosystem. Key strategic benefits include:
- Regulatory Certainty for local and foreign investors.
- Market Entry Clarity for fintechs, exchanges, wallet providers, and tokenization platforms.
- Cross-border competitiveness, as Kenya aligns with international FATF and IOSCO standards.
- Enhanced consumer trust through robust oversight.
Strategic Insights
- Start Early: The licensing window is limited. Prepare documentation, compliance systems, and governance structures now.
- Structure Locally: Foreign VASPs must establish a physical and legal presence in Kenya.
- Engage Regulators: The Bill is still under public scrutiny. Stakeholders have a unique chance to shape final provisions through participation.
How Njaga & Co Advocates Can Assist
As a forward-thinking law firm with deep expertise in financial regulation, fintech advisory, and corporate law, Njaga & Co Advocates LLP stands ready to assist stakeholders across the digital finance value chain.
We offer:
- Regulatory Advisory: Interpreting and aligning your crypto or fintech business with the VASP Bill’s requirements.
- Licensing Support: End-to-end legal support in preparing and submitting licensing applications to the CMA or other regulators.
- KYC/AML Compliance Frameworks: Drafting robust compliance manuals and protocols to meet statutory obligations.
- Corporate Structuring & Incorporation: Advising on the best legal structures for local and cross-border virtual asset operations.
- Tax Advisory and Reporting: Assisting clients in understanding and fulfilling crypto-related tax obligations in collaboration with KRA.
- Dispute Resolution and Litigation: Representation in crypto-related commercial disputes or regulatory enforcement matters.
- Ongoing Compliance: Conducting audits, updating record-keeping systems, and advising on regulatory changes.
Conclusion
Kenya’s Virtual Asset Service Providers Bill, 2025 marks a decisive move to embrace the digital financial revolution while ensuring it is secure, transparent, and accountable. For entrepreneurs, investors, and innovators in the crypto space, the future in Kenya is promising—but only with the right legal guidance.
Njaga & Co Advocates is your trusted partner in navigating the complexities of digital finance law. Let us help you unlock the future securely and lawfully. Contact us today to learn more or schedule a consultation.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified advocate for personalized legal guidance.
