Kenya to regulate digital assets with new crypto bill

Following this announcement, Kenya is set to introduce its first comprehensive legislation aimed at regulating the overall cryptocurrency sector through the use of a newly proposed Virtual Assets Service Providers (VASP) Bill. This process marks an important step made by the government to bring clarity and control to a fast-growing and unregulated part of its financial system. 

In addition, the bill will be spearheaded by the National Treasury, and it aims to introduce a structured framework requiring all virtual asset providers to be licensed by designated regulators, such as the Capital Markets Authority and the Central Bank of Kenya. 

More information on Kenya’s digital asset legislation

Beyond licensing, the legislation is expected to enforce compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) standards, as well as to introduce mandatory consumer protection provisions and require service providers to uphold strong cybersecurity standards. At the same time, this regulatory effort reflects on Kenya’s intent to exert oversight over digital currencies, while also protecting customers and businesses from fraudulent activities. 

The initiative also addresses a growing concern among authorities over financial stability, as well as potential misuse for illicit activity, and the overall protection of clients who are increasingly drawn to crypto assets for their fast, borderless, and low-cost payments. While this process could introduce new operational costs and regulatory burdens, it also presents a big opportunity for the launch of a legitimisation within the financial ecosystem that may increase user trust and attract institutional partnerships.

Through the use of this new legislation, startups will need to engage more deliberately with regulatory bodies in order to ensure that their strategies align with national policy. At the same time, regulators will be required to match the pace with the landscape’s development, as well as launch new policies that support growth without stifling agility and security.