Kenya’s legislature has taken a major step towards regulating its digital finance ecosystem with the introduction of the Virtual Asset Service Providers Bill 2025.
Gazetted in April, the bill proposes a comprehensive legal framework to license and supervise businesses and individuals dealing in digital assets such as cryptocurrencies, stablecoins and tokenised assets.
The bill defines virtual assets as digital representations of value that can be transferred, stored or traded electronically. It requires all virtual asset service providers to register and obtain licences from relevant regulatory bodies.
These include the Central Bank of Kenya, the Capital Markets Authority and the Communications Authority of Kenya, depending on the nature of services offered.
Entities currently operating in this space will have a six-month window to comply if the bill is enacted. Those found operating without a valid licence risk fines of up to ten million shillings for individuals and twenty million shillings for companies.
There are also provisions for possible jail terms for non-compliance. The bill further stipulates that every licensed entity must have a local physical office and appoint a chief executive officer who is a Kenyan resident.
Additionally, directors cannot serve on more than one board, as this will promote accountability and reduce conflicts of interest.
To promote consumer protection, the bill outlines requirements for risk management, cybersecurity, and data protection. Licensed providers must maintain accurate records, publish annual audited financial statements and ensure effective dispute resolution systems are in place.
They are also encouraged to secure insurance coverage to mitigate user losses in the event of operational failure or data breaches.
From a compliance standpoint, the Virtual Asset Service Providers Bill includes strong anti-money laundering and counter-terrorism financing measures.
Regulators will have powers to inspect operations, vet senior officials and monitor financial activity. All providers will be required to maintain bank accounts within Kenya to enhance transparency and oversight.
The proposed 3 percent Digital Asset Tax has become a point of contention within the industry. Stakeholders have raised concerns that such a high tax could stifle growth and discourage innovation in Kenya’s rapidly evolving crypto space.
The bill has been viewed as a necessary foundation for a secure and transparent digital finance industry. Some argue that regulation will enhance investor confidence, attract institutional capital and prevent misuse of digital assets.
On the other hand, critics caution that the bill’s rigid licensing demands, high penalties and proposed taxation could push innovation underground or drive local startups to more favorable jurisdictions.
