NAIROBI, Kenya, May 17 – Kenya’s fast-evolving digital assets sector is heading into a regulatory showdown as authorities move to tighten oversight of cryptocurrencies, requiring licensing, local presence, and enhanced reporting even as industry players warn the measures could raise costs and slow innovation.
The discussions come on the back of Kenya’s new virtual asset regulatory framework anchored in the Virtual Asset Service Providers (VASP) Act, 2025, which introduces the country’s first comprehensive legal structure for crypto and digital asset operations.
The framework places oversight under a dual-regulator model involving the Capital Markets Authority (CMA) and the Central Bank of Kenya, with all virtual asset service providers required to obtain licences before operating in the country. It also introduces stricter provisions on governance, capital adequacy, consumer protection, cybersecurity, and anti-money laundering compliance.
A key shift in the draft regulations is the requirement for firms especially foreign exchanges and platforms to establish a local office or legal entity in Kenya, a move regulators say is necessary to ensure enforcement, accountability, and traceability of cross-border transactions.
Speaking during a blockchain and digital currency engagement forum, Justus Agoti, Deputy Director of Markets at the Capital Markets Authority, said the rules are designed to ensure the regulator has enforceable oversight in a rapidly evolving digital finance space.
“I think the act is very clear. It provides for any funds that want to play in this group about your ass at some point.”
“You register in Kenya or have an office, okay? Without that, you’re not going to be licensed.”
Agoti said enforcement remains a key concern, particularly for offshore platforms operating without a physical presence in Kenya.
He added that the intention of the framework is to ensure that regulators can trace and act on misconduct through identifiable local entities.
However, stakeholders in the industry argue that while regulation is necessary, the cost structure embedded in the proposed framework risks discouraging participation and investment.
Peter Mwangi, Country Manager at Valr, said Kenya is positioning itself as a leading digital asset hub in Africa but warned that some provisions could undermine that ambition if not carefully calibrated.
“Kenya is properly placed to become actually the capital, what I call the capital city or the capital of virtual assets, not just in Africa, but also globally.”
“I think we gave them the feedback, they listen to that. I think once they get that rise, Kenya will have a better bill, cryptoregulation than markets like South Africa, Dubai, and other places.”
Mwangi said investors are closely watching regulatory developments, with some already signalling readiness to inject significant capital into the market if the framework is perceived as enabling rather than restrictive.
He pointed to concerns around proposed capital requirements and transaction levies, warning that overly high thresholds could disadvantage startups and push activity into informal peer-to-peer channels.
Kenya’s regulatory approach has also sparked debate over a proposed transaction levy on virtual asset trades, as well as minimum capital requirements for licensing both of which industry players say could influence market structure and participation levels.
Despite the concerns, regulators maintain that the framework is designed to balance innovation with financial stability, consumer protection, and tax compliance, particularly as digital assets become increasingly embedded in cross-border payments and investment flows.
Industry participants, however, continue to push for a more calibrated approach that avoids stifling early-stage innovation while still giving regulators sufficient oversight in a sector defined by rapid technological change.
