KENYA Law and Practice Contributed by: Keega Gakuua, Faith Njeri Njaggah and Alphonse Odido, Keega & Company Advocates
Implementation and Compliance Hurdles The primary issues stem from the shift from a grey market to a fully regulated one, creating significant pressure on both the industry and regulators. Co-ordination between regulators (The “Twin Peaks” Challenge) The framework gives the CBK oversight of payments and the CMA oversight of exchanges and tokenisa- tion. However, many business models cross these boundaries. Without clear operational co-ordination between the CBK and CMA, overlapping expectations and dual-licensing requirements risk creating uncer- tainty and slowing down innovation. High compliance burden The draft regulations propose stringent capital require- ments (eg, KES500 million for stablecoin issuers, KES150 million for exchanges) and stringent report- ing obligations. Industry stakeholders have warned that this heavy compliance burden and the frequency of reporting act as a resource drain, leaving little room for technical innovation and potentially favouring well- capitalised foreign giants over local start-ups. There is also a lack of a risk-based approach, where smaller players can be assessed on their merit and risk profile, rather than a one-size-fits-all approach. Market Access and Infrastructure Constraints Critical gaps in the supporting financial and profes- sional infrastructure could delay blockchain adoption. The banking deadlock A key bottleneck is the current inability of VASPs to open bank accounts. They cannot get a licence without proving capital, yet they cannot open a bank account to hold that capital without a licence. Resolv- ing this “chicken and egg” scenario is critical for the sector to operate. Knowledge gap and professional capacity There is a recognised shortage of professionals who understand both the technology and the institutional environment. The government also requires time and data to build supervisory capacity, which could slow down the licensing and oversight process.
Regulatory and Fiscal Pressures Simultaneously, the government is moving to assert fiscal control over the sector, which could reshape its viability. Taxation proposals The Finance Bill 2026 proposes stricter reporting rules that would compel VASPs to share transaction data with the Kenya Revenue Authority (KRA). Additionally, the proposed introduction of VAT on payment service provider and merchant services fees could increase transaction costs, potentially making Kenya a more expensive corridor for payments. Proposed transaction levies The draft regulations propose a 0.05% transaction levy on exchanges. Combined with income and capi- tal gains taxes on crypto-profits, this could create a high tax burden that some analysts warn might drive trading into informal, unregulated peer-to-peer chan- nels, undermining the goal of oversight. Issues Impacting the Adoption of Blockchain The interaction between blockchain businesses and Kenya’s intellectual property framework remains nascent and largely unintegrated. While blockchain technology offers theoretical solutions for manag- ing IP rights, such as creating immutable records of ownership and automating royalty distribution through smart contracts, existing laws and institutional prac- tices have not yet adapted to accommodate it, leaving operators in a state of regulatory uncertainty. The protection of intellectual property in Kenya is governed by conventional statutes that pre-date the emergence of blockchain technology, including the Industrial Property Act, 2001, the Trade Marks Act, and the Copyright Act, 2001, administered respec- tively by the Kenya Industrial Property Institute and the Kenya Copyright Board. These institutions oper- ate under legal frameworks that do not explicitly ref- erence or provide for the unique characteristics of blockchain-based assets or decentralised systems. 1.1.2 Regulatory Sandbox The Capital Markets Authority operates a formal regulatory sandbox that allows firms to test innova- tive products under regulatory supervision with cer-
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