KENYA Law and Practice Contributed by: Keega Gakuua, Faith Njeri Njaggah and Alphonse Odido, Keega & Company Advocates
in the first half of 2026 following a public consultation period that closed in April 2026. Under Kenya’s VASP Act, a comprehensive list of crypto-asset activities is regulated and any person offering these services “in or from Kenya” must obtain a licence from the relevant regulatory authority. The CBK regulates virtual asset payment processors, custodial wallet providers, and stablecoin issuers. The CMA regulates virtual-asset exchanges, brokers, investment advisers, managers, and virtual-asset offering providers, including those involved in ICOs and the tokenisation of real-world assets. The defini- tion of a “virtual asset” under Kenyan law excludes digital representations of fiat currencies, securities, and other financial assets already regulated under the CMA. Prohibited Services The most explicit prohibitions target services designed to obscure transaction trails. The Act specifically pro- hibits “anonymity-enhancing services” and “mixer or tumbler services” that conceal the origin or destination of virtual-asset transactions, reflecting FATF concerns regarding money-laundering and terrorist-financing. Algorithmic stablecoins, which maintain their peg without holding corresponding liquid reserves, are not recognised as stablecoins under the statutory defi- nition and therefore cannot be issued by a licensed VASP, making them implicitly prohibited. Decentral- ised finance protocols also fall outside the regulatory ambit. Regarding the distinction between retail and profes- sional markets, the VASP Act draws no such dis- tinction. The licensing requirements apply uniformly regardless of whether the VASP serves retail clients or institutional investors. New Regulations Several key crypto-asset regulations are expected to come into force in Kenya over the next 12 months. The draft Virtual Asset Service Providers (VASP) Regula- tions, 2026, which operationalise the VASP Act, 2025, are expected to be finalised in the first or second quar- ter of 2026 following a public consultation period that closed on 10 April 2026. Once issued, the CBK will begin licensing stablecoin issuers, wallet providers
and payment processors, while the CMA will over- see exchanges, brokers, fund managers, tokenisation platforms and ICOs. Notably, the one-year transitional period for exist- ing VASPs expires on 4 November 2026, after which unlicensed operators face criminal penalties including fines of up to KES10 million or imprisonment for up to five years Additionally, the Finance Bill 2026, introduced to par- liament on 30 April 2026, proposes significant new reporting and tax disclosure requirements for crypto- asset businesses. Under proposed amendments to the Tax Procedures Act (new Sections 6C and 6D), VASPs would be required to file annual information returns with the Kenya Revenue Authority disclosing user identities, wallet information and transaction his- tories. The Bill is expected to be enacted in June 2026, with certain digital reporting requirements scheduled to take effect from 1 January 2027. 2.3 Regulated Firms and Legal Wrappers Legal Wrappers The use of a legal wrapper such as a fund does not exempt investors or fund managers from the licens- ing and compliance requirements that apply to direct participation in virtual asset activities. The VASP Act targets the provision of “virtual asset services” in or from Kenya, and this includes managing, advising on, or holding virtual assets on behalf of clients, regard- less of whether those clients are retail investors or Regulated firms and investment funds with exposure to crypto-assets face significant regulatory conse- quences under Kenya’s VASP Act, 2025. A fund man- ager that provides advisory or discretionary manage- ment services involving virtual assets must obtain a VASP licence, with the specific category depending on the activity: investment advisers require paid-up capital of KES2.5 million, asset managers require KES30 million, and tokenisation or token issuance providers require KES200 million. institutional funds. Regulated Firms
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