Kenya passes crypto law, clarifies rules and taxes
NAIROBI — Kenya has taken a decisive step toward mainstreaming digital assets. Specifically, Parliament has passed the Virtual Asset Service Providers (VASP) Bill, 2025, establishing the country’s first comprehensive rulebook for crypto markets and laying out who regulates what, how firms will be licensed, and how activity will be taxed. The Bill—approved on 13 October 2025 and now awaiting presidential assent—aims to attract reputable operators while closing gaps that have left consumers exposed and tax authorities chasing shadows.
A clear split of responsibilities
The law adopts a model that divides oversight between the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA). In broad terms, issuers and money-like tokens, including stablecoins, fall under the CBK, whereas exchanges, brokers, custodians and other market intermediaries come under the CMA. That split reflects how crypto now spans both payment-like functions and investment-style activities. It also mirrors arrangements seen in other jurisdictions, giving clarity to global firms that might otherwise hesitate to build onshore.
Crucially, the Bill moves crypto service providers inside Kenya’s financial-integrity perimeter. Licensed firms will face know-your-customer and anti-money-laundering obligations, segregation of client assets, disclosure requirements, and market-abuse rules. For users who have relied on peer-to-peer venues with uneven standards, the change should make a practical difference: better custody, clearer complaint channels, and regulators empowered to act when things go wrong.
Tax policy moves from blunt to targeted
Kenya’s approach to taxation has evolved alongside regulation. The 3% Digital Asset Tax introduced in 2023—controversial because it applied to gross transaction value—was repealed by the Finance Act 2025. In its place, the government is steering toward excise duty on platform fees, aligning tax with intermediation services rather than the underlying asset value. For investors, that reduces trading friction. For the state, it provides a revenue stream tied to activity that is easier to audit and collect, especially once licensed platforms are required to report fee income and user residency.
The shift also matters for the wider tax system. With KYC embedded and reporting standardized, income arising from crypto-related services becomes more visible for income-tax and VAT purposes. That is a more sustainable way to bring a fast-moving sector into the mainstream than trying to tax every trade at face value.
Why the crypto law was needed—and what it unlocks
Kenya is already a fintech leader thanks to M-Pesa and a mature mobile-money ecosystem. Yet crypto activity has operated in a grey zone: popular with retail users and startups, but hampered by the absence of a licensing pathway and by banking uncertainty. A statutory framework should lower risk for reputable global platforms that prefer to serve customers under clear rules. It should also give local startups a predictable compliance path and access to banking services, rather than pushing them offshore.
For consumers, the benefits are straightforward. Client-asset segregation reduces the chance that a platform failure becomes a personal loss. Fair-marketing rules should curb overly aggressive promotions. And recourse mechanisms—from internal dispute handling to regulator-led remedies—become more realistic when firms are identifiable and licensed.
The open questions that will decide how effective it is
The text that passed Parliament provides the scaffolding, but implementing regulations will determine the building. Several questions will shape outcomes:
- Stablecoins. If fiat-referenced tokens are permitted, what reserve, attestation, and redemption standards will the CBK impose? Will issuers need local banking and liquidity to guarantee timely settlement in Kenya shillings during stress?
- Perimeter. How will the regime treat staking, lending, NFTs and DeFi protocols? Drawing lines too narrowly risks regulatory arbitrage; too broadly, and innovation goes elsewhere.
- Cross-border supervision. Kenyan users often interact with offshore platforms. Memoranda of understanding with foreign regulators and API-level data sharing will be essential to make onshore compliance meaningful.
- Tax administration plumbing. Excise on fees is simpler in principle. In practice, it requires standardized reporting formats, clear withholding mechanics for Kenyan-resident users on mixed onshore/offshore stacks, and coordination with the Kenya Revenue Authority.
How Kenya compares with peers on crypto regulation
Across Africa, crypto rules are converging but not identical. South Africa treats crypto assets as financial products under its conduct regulator, requiring licensing and compliant advertising. Botswana runs a statutory VASP regime with licensing and AML obligations baked in. Nigeria has oscillated between restrictions on banks and steps toward licensing, with banking access still a live issue. Kenya’s split-supervision model and fee-based taxation place it in a pragmatic middle ground: payments-like tokens supervised by the central bank; trading venues and custody subject to market oversight; taxes targeted at the intermediation layer. For a country with deep mobile-money rails and an active developer community, that balance could prove attractive.
What companies should do now
Platforms that plan to operate in Kenya should prepare for licence applications, capital and governance tests, and client-asset segregation. Contracts may need to be re-papered to reflect excise on fees and the VAT characterization of ancillary services. Technically, firms should expect to build regulatory APIs for reporting, including event-driven updates on fee income, client-onboarding, suspicious-activity flags, and complaint outcomes. Enterprises exploring tokenized payments or loyalty schemes should map projects to the appropriate perimeter—CBK for issuer-like activity, CMA for market intermediation—and design controls accordingly.
What to watch next
If the President signs the Bill, regulators will open a licensing window and publish detailed rules. Early signals to monitor include: reserve requirements and redemption rights for stablecoins; transitional relief for existing platforms; reporting templates that allow oversight without over-collecting personal data; and the first enforcement actions that set precedent. Those choices will determine whether Kenya becomes a magnet for serious capital or merely codifies activity that continues offshore.
Bottom line: Kenya’s crypto law provides what markets crave—clarity. It does not guarantee good outcomes on its own, but it gives regulators tools to protect consumers, gives businesses a path to compliance, and gives the tax authority a cleaner way to collect. In a region where policy signals are often mixed, that coherence is a competitive advantage.
