Kenya proposes a new policy for the monitoring and control of digital currencies and assets
Kenya Advances Comprehensive Cryptocurrency Regulatory Framework
In a bid to foster fintech innovation and investor protection, while ensuring compliance with international anti-money laundering (AML) and combating the financing of terrorism (CFT) standards, Kenya is actively advancing a comprehensive regulatory framework for cryptocurrency. This initiative is primarily driven by the Virtual Asset Service Providers (VASP) Bill, 2025, which assigns regulatory responsibilities to the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK).
The VASP Bill, which is inspired by international standards such as those from the Financial Action Task Force (FATF), introduces formal regulation and oversight of crypto service providers. The Bill sets licensing, operational standards, and minimum capital requirements for VASPs. The framework aims to legitimize crypto services, build investor confidence, and reduce risks linked to unregulated crypto activities while fostering innovation in digital finance.
One of the key regulatory interventions is the VASP Licensing and Oversight. This requires formal licensing by the CBK and CMA to ensure compliance with operational and financial standards. Another intervention is Record-Keeping and Customer Identification, which mandates crypto businesses to maintain comprehensive records and share them with regulators to comply with AML/CFT mandates, aligning with FATF Travel Rule protocols.
The regulatory drive also includes Taxation Reforms. The prior 3% Digital Asset Tax (DAT) introduced in 2023 has been replaced by a 10% excise duty on fees charged by VASPs, aiming to create a more balanced tax framework supporting innovation without discouraging crypto activities. Additionally, Kenya seeks to reduce expensive remittance fees, previously 5%-15%, to potentially below 2%, benefiting millions of households relying on diaspora remittances.
The Kenyan government is also seeking public input and plans to conduct public participation forums as part of its cryptocurrency regulatory drive. The DAT applies to the exchange of virtual assets between exchanges and is a 3% tax on the gross income from the trade or exchange of virtual assets in Kenya.
Kenya's cryptocurrency regulatory journey has been marked by inconsistency, as evident in the 2015 Central Bank of Kenya (CBK) warning to financial institutions to refrain from dealing with cryptocurrencies. The Kenyan government has also looked to countries like the United Kingdom, France, the United States of America, Singapore, Mauritius, Nigeria, and the European Union for lessons on implementing virtual assets regulations.
The draft policy, developed by the Kenyan National Treasury and Economic Planning, dates back to December 2024. Kenya's cryptocurrency regulatory drive also includes addressing controversies, such as the one surrounding the decentralized identity protocol, Worldcoin.
Looking ahead, Kenya's comprehensive cryptocurrency regulatory framework, drawn from global models like Dubai and Singapore's regulatory paths, positions the country as a regional crypto hub while addressing concerns over illicit financial flows.
- The Virtual Asset Service Providers (VASP) Bill, 2025 in Kenya is inspired by international standards and aims to legitimize crypto services by introducing formal regulation and oversight of crypto service providers.
- Kenya's cryptocurrency regulatory framework sets licensing, operational standards, and minimum capital requirements for VASPs, with the Central Bank of Kenya (CBK) and Capital Markets Authority (CMA) assigned regulatory responsibilities.
- Kenya seeks to reduce expensive remittance fees by potentially lowering them below 2%, benefiting millions of households relying on diaspora remittances, as part of its cryptocurrency regulatory drive.
- Kenya's comprehensive cryptocurrency regulatory framework, drawn from global models like Dubai and Singapore's regulatory paths, positions the country as a regional crypto hub while addressing concerns over illicit financial flows.
- The Kenyan government is looking to countries like the United Kingdom, France, the United States of America, Singapore, Mauritius, Nigeria, and the European Union for lessons on implementing virtual assets regulations in its cryptocurrency policy.
