Kenya is tightening oversight on the digital asset space with a newly proposed law that seeks to introduce steep penalties for unlicensed operations. The Virtual Asset Service Providers Bill, 2025, tabled in Parliament by National Assembly Majority Leader Kimani Ichung’wa, proposes up to five years imprisonment or a fine of up to KSh 10 million for firms offering crypto-related services without proper registration.
The proposed legislation grants far-reaching powers to the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA). Under the bill, the two regulators would be authorised to freeze assets, shut down non-compliant platforms, and take legal action against directors of unlicensed firms.
This legislative effort aligns with recommendations from the Financial Action Task Force (FATF), as Kenya seeks to address concerns flagged in its placement on the FATF “grey list” — a designation given to jurisdictions with strategic deficiencies in countering money laundering and terror financing.
To secure licenses under the new law, virtual asset providers would be required to maintain a physical presence in Kenya, implement strict anti-money laundering systems, and submit to background checks on directors and beneficial owners. This new bill updates a 2024 version previously drafted by the Treasury, aiming to address gaps identified by both regulators and industry players.
In early 2025, members of the Virtual Asset Chamber of Commerce (VACC) held a consultative meeting with National Treasury officials in Naivasha, where they expressed concern over the ambiguous nature of several clauses in the earlier draft. While the latest version attempts to refine the legal framework, it remains unclear whether it fully meets the expectations of the blockchain and crypto industry.
One significant change in the 2025 bill is the removal of an enforcement clause that had previously imposed daily financial penalties for platforms that failed to grant regulators read-only, real-time access to transaction data. While the duty to provide access remains intact, the penalty clause has been dropped, leaving only license suspension or revocation as potential consequences for non-compliance.
The bill also clarifies the jurisdiction of regulators. Wallets and custodial services will now fall under the purview of the CBK, while the CMA will take charge of exchange platforms and investment activities — a move aimed at resolving the overlapping mandates observed in the 2024 draft.
Additionally, the new proposal introduces formal licensing for Token Issuance Platforms, which will enable the creation and trading of digital tokens backed by physical assets such as real estate, artwork, or commodities. This inclusion marks a strategic shift toward using blockchain to expand access to capital markets, particularly for retail investors.
Another key development is the recognition and classification of stablecoins and initial coin offerings (ICOs) — elements that were entirely absent in the previous version. The CBK will regulate stablecoins, particularly those pegged to fiat currencies, while ICOs will fall under the CMA, following a model similar to that used for traditional securities.
Furthermore, the bill includes a clause compelling virtual asset service providers to comply with the FATF’s Travel Rule, which requires platforms to collect and share identifying information on both parties in crypto transactions. While regulators view this as a vital tool for curbing illicit finance, the requirement remains contentious within crypto circles due to concerns over user privacy.
If passed, the Virtual Asset Service Providers Bill, 2025 will represent Kenya’s most comprehensive attempt yet to regulate the cryptocurrency sector and align with global standards, while also nurturing a framework for innovation and investment in digital finance.
