Regulators Move to Bring KES 2.5 Trillion Crypto Market Under Formal Oversight

By Chemtai Kirui | Nairobi | March 18, 2026

 

The National Treasury is moving to bring the fast-growing cryptocurrency market under formal regulation, ending nearly a decade of largely unregulated activity despite repeated warnings from the Central Bank of Kenya.

 

The shift marks a turning point for one of Africa’s most active digital asset markets.

 

On Tuesday, Treasury Cabinet Secretary John Mbadi invited public comment on the Draft Virtual Asset Service Providers (VASP) Regulations, 2026—rules designed to operationalize the VASP Act of 2025 and bring an estimated KES 2.5 trillion ($19 billion) in annual cryptocurrency inflows under formal oversight, according to Chainalysis.

 

At the centre of the proposal is a dual regulatory model that splits oversight between financial authorities.

 

The Central Bank will supervise payment-facing activities, including stablecoin issuers and firms that convert digital assets into shillings, while the Capital Markets Authority will oversee trading platforms, brokers and tokenized investment products.

 

The split reflects a long-running question for regulators: whether digital assets should be treated as money or as investment products.

 

For an estimated six million users holding crypto assets, the changes signal tighter control of the platforms that underpin the market.

 

The draft introduces a mandatory “fit and proper” test for company directors, alongside requirements for firms to separate customer funds from operational accounts, undergo independent audits and comply with anti-money laundering standards.

 

The framework also extends into data governance. Firms must comply with the Data Protection Act, 2019 and retain transaction records for up to seven years as part of licensing requirements.

 

It further bars individuals from operating as virtual asset service providers, requiring all operators to be incorporated companies with a physical presence in the country. For independent peer-to-peer agents who have long driven activity in the market, the shift signals a move toward formalization within a defined transition period.

 

The regulations also ban the use of transaction-obscuring tools such as crypto “mixers,” aligning the framework with global standards set by the Financial Action Task Force.

 

The model mirrors regulatory systems already in place in major financial centres.

 

The European Union’s Markets in Crypto-Assets (MiCA) framework, which becomes fully operational in 2026, introduces a unified licensing regime across member states. In Singapore, the Payment Services Act has brought digital asset firms under formal supervision, though at the cost of forcing non-compliant operators out of the market.

 

Both models point to a similar outcome: stronger oversight, but higher barriers to entry.

 

Under Part IV of the Virtual Asset Service Providers Act, 2025, the framework introduces stricter structural requirements that go beyond financial oversight. Clause 9(2) bars individuals from offering virtual asset services, requiring all providers to be incorporated entities, while Clause 21 restricts cross-directorships in an effort to limit market collusion.

 

The Virtual Asset Association of Kenya warns that, while the measures strengthen accountability, the added compliance burden—combined with licensing, insurance and audit requirements—could push out smaller operators and disrupt the peer-to-peer networks that have long driven market liquidity.

 

According to the National Treasury’s draft regulatory impact statement, a full-scale exchange would be required to maintain a minimum paid-up capital of KES 50 million (about $385,000), while smaller brokers and wallet providers would face a KES 10 million ($77,000) threshold. Firms would also be required to hold an insurance guarantee equivalent to at least 2 percent of monthly transaction volumes to protect users against losses, including from cyber incidents.

 

In addition, all operators must be incorporated locally, maintain a physical office and appoint at least three resident directors subject to “fit and proper” vetting.

 

Industry players say the requirements, while aimed at strengthening oversight, could raise barriers to entry in the absence of a tiered licensing framework or regulatory sandbox, potentially placing smaller domestic startups at a disadvantage.

 

While this strengthens accountability, it could narrow the space for early-stage innovation.

 

Beyond domestic concerns, the regulations reflect a broader policy objective—positioning the country more firmly within the global financial system.

 

By aligning with international anti-money laundering standards, authorities are seeking to improve credibility with global financial institutions and reduce exposure to external scrutiny.

 

The Treasury has opened the draft for public consultation from March 30, with submissions due by April 10.

 

The outcome will shape how regulators balance two competing priorities: protecting consumers and financial stability, while preserving the innovation that has defined the country’s fintech sector.

 

For a market that has grown largely outside formal oversight, the transition will test whether tighter regulation can deliver stability without slowing the momentum that made the country a regional fintech leader.