KENYA Law and Practice Contributed by: Keega Gakuua, Faith Njeri Njaggah and Alphonse Odido, Keega & Company Advocates
1.2.2 Access to Banking Statutory Restrictions
The proposed Finance Bill 2026 further introduces mandatory annual information reporting for VASPs, requiring disclosure of user identities, wallet informa- tion, and full transaction histories to the Kenya Rev- enue Authority. Similarly, the VAT Act does not explicitly exempt virtual asset services, creating legal ambiguity as to whether VASPs must also charge VAT on the same fees. This risks an unfair cumulative tax burden compared to traditional financial services, which are VAT-exempt. Additional uncertainties include the characterisation of income from digital assets (whether gains are taxed as business income or capital gains), the lack of loss recognition for volatility-related losses, and the risk that routine transfers between wallets may be treated Kenya has not yet developed a specific, standalone insolvency regime for blockchain-based businesses, but the VASP Act has introduced critical frameworks for customer asset protection that would govern the winding-up of licensed digital asset firms. The Act mandates that client assets must be held in segre- gated accounts, separate from the company’s opera- tional funds, meaning that in an insolvency scenario, customer crypto-assets should theoretically be pro- tected from the claims of company creditors. 1.2.6 Industry and Trade Bodies The VAAK brings together industry, regulators and partners to build Kenya’s virtual-asset ecosystem responsibly. It co-ordinates standards, facilitates dia- logue, and connects Kenya to global best practices. 2. Regulation 2.1 Regulators and International Alignment Local Regulation The regulation of blockchain and crypto-asset busi- nesses is shared among several key bodies, each with a distinct statutory mandate. as taxable events. 1.2.5 Insolvency
Firms providing crypto-asset services in Kenya face significant restrictions regarding their banking and payment partners. Licensed Virtual Asset Service Providers must maintain a local bank account as part of their operational requirements under the VASP Act, 2025. Additional restrictions apply to specific categories. Stablecoin issuers face a mandatory local banking link: at least 30% of their reserve assets must be held in segregated accounts at commercial banks domi- ciled in Kenya. More broadly, all VASPs are required to maintain a physical office in Kenya, meaning that off- shore accounts or non-Kenyan payment partners are not sufficient for compliance. In practice, the ability to secure and maintain banking relationships remains a critical operational hurdle for VASPs, pending full implementation of the licensing regime and greater bank comfort with the regulated status of virtual asset services. Practical Restrictions The most pressing restriction is not statutory but prac- tical – Kenyan commercial banks remain reluctant to onboard crypto-related businesses due to long- standing regulatory ambiguity, despite the VASP Act being in force. The detailed implementing regulations are still being finalised, and until the full framework is operational, many banks are cautious about servicing VASPs. 1.2.3 ESG/Sustainable Finance There are currently no specific ESG or sustainable finance requirements (eg, mandatory disclosure or reporting obligations) that apply to digital assets or their issuers in Kenya. 1.2.4 Tax The tax regime in Kenya has been significantly updat- ed to consider digital assets. The Finance Act 2025 repealed the initial 3% Digital Asset Tax on gross transaction value and introduced an excise duty of 10% on fees and commissions charged by licensed VASPs for their services.
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