Kenya’s parliament has passed a bill to regulate digital currencies and virtual assets, moving the country closer to formal oversight of its fast-growing crypto market. The Virtual Asset Service Providers Bill, approved last week, now awaits President William Ruto’s signature to become law.

Digital assets meet tradfi in London at the fmls25

The legislation sets out clear licensing rules for crypto issuers and exchanges, a development that aims to improve investor confidence and attract fresh investments into Kenya’s fintech sector.

This move could position Kenya as a key hub for crypto innovation in Africa, as the country seeks to attract more investments amid a booming digital finance environment.

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A Dual Regulatory Structure

The Virtual Asset Service Providers Bill 2025 delineates responsibilities between two main bodies. The Central Bank of Kenya will oversee the licensing of stablecoins and other virtual assets, while the Capital Markets Authority will regulate exchanges, brokers, and trading platforms.

This approach replaces an earlier proposal for a separate regulatory authority, streamlining supervision under existing agencies with mandates adjusted to cover the crypto sector. Operators will face strict requirements, including physical presence in Kenya, board composition standards, client fund segregation, and compliance with anti-money laundering protocols.

As digital assets gain global traction, governments struggle to balance innovation with risk management. Kenya’s legislation draws inspiration from regulatory models in the US and the UK, aiming to reduce vulnerabilities such as fraud and money laundering often associated with anonymous crypto transactions.

The law also introduces stringent penalties for non-compliance, including steep fines and prison terms. By implementing these measures, Kenya hopes to provide a safer environment for investors while tapping into the opportunities presented by the expanding fintech landscape.

Strategic Importance Amid Stablecoin Surge

This law coincides with a global surge in US dollar-backed stablecoins. Regulators worldwide warn that these stablecoins can destabilize the currencies of less developed economies. Kenya’s law, by bringing stablecoin issuance under central bank oversight, seeks to protect monetary stability while fostering innovation.

Past interactions between the government and major crypto exchanges like Binance and Coinbase signal potential increased investment flows into Kenya’s fintech sector, supported by the newly predictable regulatory framework.

Kenya’s population, especially younger demographics aged 18 to 35, increasingly uses virtual assets for trading, payments, and business. The precedent set by Kenya’s mobile financial service innovations, notably M-Pesa, highlights the country’s readiness to adopt new financial technologies.

While virtual assets have grown globally over the past decade, a lack of regulation has sparked concerns. With this new bill, Kenya addresses those regulatory gaps, aiming to remove the sector from a prior gray area and bring it in line with international standards.

Source: Finance Magnates