Kenya Enacts Virtual Assets Law

In April 2025, we published an article outlining Kenya’s policy on virtual assets. At the time, the Virtual Asset Service Providers Bill was before the National Assembly for debate. The National Assembly has passed the bill, and the President has assented to it as the Virtual Asset Service Providers Act, 2025 (the “VASP Act“).

The VASP Act provides regulatory clarity on virtual assets. It directly addresses the Financial Action Task Force (“FATF”) recommendations to Kenya for a clear legal framework for virtual assets. As seen in jurisdictions such as Dubai and South Africa, formalising the virtual asset ecosystem is likely to unlock more investment flows and promote access to a broader range of financial and capital markets services in Kenya. Additionally, the enactment of the VASP Act will support Kenya’s efforts to be removed from the FATF grey list.

The VASP Act requires every person offering virtual asset services in Kenya to be licensed. It designates the Capital Markets Authority (CMA) and Central Bank of Kenya (CBK) as the primary regulators of virtual asset activities in Kenya.

The VASP Act regulates entities offering the following services in Kenya:

• Virtual asset wallet providers who provide custodial wallets or services.
• Virtual asset exchanges that facilitate the (i) transfer and conversion services of one or more virtual assets or between virtual assets and fiat currency or (ii) sale, trade, or exchange of virtual assets for fiat currencies or for other virtual assets.
• Virtual asset payment gateway processors who arrange transactions involving virtual assets and fiat currency or between virtual assets.
• Virtual asset brokers who provide brokerage services to facilitate the exchange between one or more forms of virtual assets through virtual asset exchanges and virtual asset wallet providers on behalf of clients.
• Virtual assets investment advisors who provide investment advisory services on virtual assets, initial virtual asset offerings, and non-fungible tokens on behalf of clients.
• Virtual asset managers who manage virtual asset portfolios in accordance with mandates given by clients on a discretionary basis where such portfolios include one or more virtual assets.
• Virtual asset offering providers who issue and sell virtual assets to the public. This includes initial coin offerings, tokenisation of virtual assets and issuance of stablecoins.
• All licensed entities must be incorporated in Kenya and will be subject to mandatory ongoing compliance requirements.

While the VASP Act provides a clear path forward, we are cautiously optimistic about its implementation. The VASP Act requires the Cabinet Secretary for the National Treasury, in consultation with the designated regulators, to issue detailed regulations that will specify the licensing, capital, and ongoing compliance requirements for virtual asset service providers (VASPs) and issuers of virtual assets. Moreover, we expect the CMA and the CBK to issue guidance notes to traditional financial institutions that intend to offer virtual asset services, whether through existing licensed entities, subsidiaries or in partnership with VASPs.

Furthermore, the VASP Act is the foundational legal pillar of the National Policy on Virtual Assets and Virtual Asset Service Providers, 2024. The national policy includes other interventions that the government must fully implement for the ecosystem to thrive. These interventions include the promotion of financial literacy, fostering innovation, and building supervisory capacity.

Drawing from our experience with digital credit provider licence applications, obtaining regulatory approvals in Kenya within stipulated timelines is becoming increasingly challenging. This can be attributed to various factors, including a shortage of staff to review the high volume of applications.

Prospective VASPs and issuers of virtual assets should prepare for a potentially lengthy approval process. In addition to the capacity issues we have highlighted above, other factors that might cause delays include the unique nature of virtual assets and the cautious approach previously taken by the CMA and CBK regarding them.

In anticipation of this challenge, we recommend that applicants for VASP licences and for initial virtual asset offerings prepare comprehensive, high-quality applications. Applicants must assure the regulators of their commitment to supporting Kenya in combating illicit financial activities, including money laundering, terrorism financing and proliferation financing. They must demonstrate adequate internal controls, governance structures, and robust processes for cybersecurity and consumer protection.

Our team has practical experience in the virtual asset space, having advised clients locally and globally on innovative projects involving cross-border virtual assets, microlending, and payment transactions. We remain available to provide legal support and offer practical insights in this area.

This article is prepared for general information. It is not, and does not aim to be, comprehensive. Given the general nature of its content, it should not be considered legal advice. For specific advice, please contact Peter Mwaura in our Kenya office.