Legislation proposing rules for Virtual Asset Service Providers (VASPs) put before Kenyan parliamentarians

Legislation proposing rules for Virtual Asset Service Providers (VASPs) put before Kenyan parliamentarians

Kenya's Virtual Assets Service Providers (VASP) Bill 2025: Paving the Way for Crypto Regulations

Kenya is set to establish a comprehensive regulatory framework for virtual asset service providers (VASPs) with the introduction of the VASP Bill 2025. The Bill, presented to Kenyan legislators on April 4, aims to provide formal licensing, regulatory clarity, and compliance standards for crypto service providers.

The VASP Bill creates Kenya’s first comprehensive regulatory framework for virtual asset service providers, mandating that all entities offering virtual asset services must be licensed by regulators such as the Capital Markets Authority and the Central Bank of Kenya. Only legal entities like limited liability companies can operate as VASPs, ensuring accountability and institutional standards.

The law defines virtual assets as digital representations of value that can be traded or transferred digitally, excluding fiat currency, e-money, securities, and traditional financial assets. Services regulated under the Bill include virtual asset wallets, exchange services (fiat-to-crypto and crypto-to-crypto), payment processing, brokerage, investment advisory, initial virtual asset offerings, mining, stablecoin issuance, and tokenization platforms.

A strong emphasis is placed on anti-money laundering (AML) and counter-financing of terrorism (CFT) compliance, requiring VASPs to implement robust internal risk management, perform customer due diligence, and report suspicious activity. Cybersecurity and data protection standards aligned with Kenyan law are also mandatory.

The Bill introduces minimum capital requirements and operational standards for VASPs, which help legitimize virtual asset services and build investor confidence by eliminating regulatory uncertainty that previously hindered innovation and financial institutions' engagement with crypto.

Kenya is simultaneously positioning itself as a leader in Africa’s digital finance ecosystem by embracing blockchain innovation, stablecoins, and potentially holding Bitcoin reserves. The VASP Bill is part of a broader strategy that aims to support innovation, promote financial inclusion, and protect consumers as the country’s crypto market grows, with monthly trading volumes estimated over $500 million.

The Kenyan government is also considering the adoption of the “Travel Rule”, an international AML protocol requiring VASPs to share information about originators and beneficiaries of transactions, indicating alignment with global crypto regulations.

A Kenyan-based blockchain advocacy group, the Virtual Assets Chamber of Commerce (VACC), has submitted policy recommendations to the technical committee on crypto regulations. Kenya is the latest African country to introduce a licensing program for VASPs to become operational legally within its borders.

The bill's implementation requires VASPs to secure operating licenses in accordance with Kenyan laws. Licensed exchanges, according to the bill, must open physical offices in the country. Under the new legal regime, only licensed entities can issue initial coin offerings (ICOs) in Kenya.

While South Africa is the most advanced in this process having issued more than 240 licenses, Nigeria is not far behind, opening a sandbox for VASPs and issuing provisional licenses to two firms last year. Other countries, such as Morocco and Ghana, are still in the process of creating legal rules to guide crypto usage.

The VASP Bill 2025 establishes formal licensing, regulatory clarity, and compliance standards for crypto service providers, aiming to secure consumer protection, promote innovation, and integrate Kenya’s crypto economy into the global regulatory landscape.

[1] Capital Markets Authority (CMA) - [https://www.cmacorporate.co.ke/] [2] Central Bank of Kenya (CBK) - [https://www.centralbank.go.ke/] [3] Virtual Assets Chamber of Commerce (VACC) - [https://vacc.africa/] [4] Financial Action Task Force (FATF) - [https://www.fatf-gafi.org/]

1. The VASP Bill 2025, presented in Kenya, mandates all crypto service providers to obtain formal licensing from regulatory bodies like the Capital Markets Authority and the Central Bank of Kenya.
2. Kenya's comprehensive regulatory framework for virtual assets includes services such as wallets, exchange services, payment processing, brokerage, investment advisory, initial virtual asset offerings, and tokenization platforms.
3. The VASP Bill emphasizes AML and CFT compliance, requiring VASPs to implement robust internal risk management, perform customer due diligence, and report suspicious activity.
4. The Kenyan government is considering the adoption of the "Travel Rule," an international AML protocol, indicating alignment with global crypto regulations.
5. Kenya's strict regulatory measures, aimed at securing consumer protection, promoting innovation, and integrating the crypto economy into the global regulatory landscape, make it a growing hub for digital assets in Africa.
6. Similar to Kenya, Nigeria is also progressing in establishing a regulatory framework for crypto service providers, having issued provisional licenses to two firms and opening a sandbox for VASPs last year.

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