Key Highlights
- Kenya unveils crypto regulatory framework requiring licensing, reserves, and transparency measures.
- Public consultation period extends through April 10 for stakeholder input on virtual asset rules.
- Stablecoin providers must maintain 30% of funds in segregated domestic bank accounts.
- Proposed levies include 0.05% on token transactions and 0.5% on initial asset offerings.
- Framework broadens crypto definitions while mandating regular audits and coordinated oversight.
The National Treasury of Kenya released comprehensive draft legislation on Wednesday establishing a regulatory framework for virtual assets and service providers. The proposed regulations introduce mandatory licensing procedures, reserve requirements, and transparency obligations designed to take effect under the 2026 framework. Authorities have opened a public comment window through April 10 to gather stakeholder perspectives.
This regulatory initiative follows Kenya’s placement on the 2024 Financial Action Task Force grey list. Officials seek to close regulatory loopholes in anti-money laundering protocols and counter-terrorism financing safeguards. The proposed framework establishes precise operational standards intended to enhance market credibility and investor protection.
The Treasury developed the draft framework through collaborative efforts with the Central Bank of Kenya and the Capital Markets Authority. This coordinated methodology integrates multiple regulatory perspectives with global compliance benchmarks. Industry participants and the public can examine the proposals and provide written submissions during scheduled consultation sessions.
Updated Licensing Framework and Expanded Definitions
The proposed crypto law extends licensing availability to limited liability partnerships in addition to corporate entities. Regulatory bodies commit to processing applications and issuing determinations within a 90-day timeframe. The revised framework shifts license validity to 12-month periods beginning from the date of issuance, replacing the previous December 31 expiration model.
The legislation introduces an expanded definition of virtual assets encompassing any digital value representation connected to tangible assets. The term “issuer” now covers both natural persons and legal entities engaged in creating or publicly distributing crypto-assets. These broader classifications aim to encompass evolving token structures and decentralized distribution systems.
All virtual asset service providers face mandatory requirements to establish and operate banking relationships within Kenya. Providers must undergo comprehensive system evaluations every two years examining cybersecurity protocols, data integrity measures, and operational continuity. Qualified IT auditors with appropriate certifications will perform these mandatory compliance assessments.
Stablecoin Reserve Mandates and Fee Structure
Under the proposed regulations, stablecoin issuers must allocate a minimum of 30% of backing funds to segregated accounts at licensed Kenyan banking institutions. Additional reserves must be held in secure, low-risk domestic instruments meeting high-quality liquid asset criteria. Qualifying instruments include physical currency, central bank reserve deposits, short-duration government bonds, and repurchase transactions.
The framework introduces transaction-based fee structures for digital asset service providers. Platforms facilitating token issuance would remit a 0.05% charge on each transaction, while initial virtual asset offerings would attract a 0.5% assessment. Regulators structured these charges to generate supervisory funding while preserving market competitiveness.
The Treasury has organized 11 regional consultation forums spanning Mombasa, Kisii, Kisumu, Makueni, Kirinyaga, Kakamega, Garissa, Kitale, Meru, Nakuru, and Nairobi. These sessions provide opportunities for industry stakeholders and civic organizations to contribute feedback. Submissions received will inform legislative revisions prior to final implementation.
