Virtual asset firms set for fresh licensing under new law

Kenya’s Virtual Asset Service Providers (VASPs) are set to be licensed afresh under the Virtual Assets Service Providers (VASP) Act, 2025, which came into effect on November 4, 2025.

The law establishes a formal licensing and regulatory framework for firms dealing in cryptocurrencies, stablecoins, and non-fungible tokens (NFTs).

The Act gives the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) the mandate to regulate, supervise, and license VASPs, introducing new compliance and reporting standards.

Under the law, all existing and new digital asset firms must meet obligations to prevent money laundering, terrorism financing, and proliferation financing before they can operate legally.

CBK and CMA clarified that no VASP is currently licensed, with formal licensing set to begin once the National Treasury issues detailed regulations to guide the process.

The law introduces dual regulatory oversight: the CMA will license and supervise crypto exchanges and tokenized securities platforms, while CBK will oversee the issuance of stablecoins, virtual wallets, and payment infrastructure.

All VASPs, including exchanges, brokers, and wallet operators, must adhere to strict compliance standards, including Know Your Customer (KYC) checks, anti-money laundering (AML), and counter-terrorism financing (CFT) reporting.

Yellowcard Kenya Country Manager Peter Mwangi described the new legislation as transformative for investors, innovators, and consumers.

“The bill will create confidence for investors, generate employment, and make money transfers from abroad easier and cheaper,” he said, noting that Kenya ranks third in Africa for crypto adoption, with nearly four million users by mid-2024.

Mwangi called the regulatory framework “progressive,” balancing innovation with accountability. It includes stringent consumer protection rules, such as clear disclosure of fees and risks, segregation of client funds, and robust cybersecurity requirements. Non-compliance will attract hefty fines and possible imprisonment.

He added that Kenya could draw lessons from South Africa’s institutional crypto adoption, encouraging banks and corporations to explore blockchain technology.

 “The next step is for Kenya to push institutional adoption of stablecoins and crypto, just like the U.S. and South Africa,” Mwangi said.

The VASP Act marks Kenya’s first structured attempt to bring the rapidly growing digital assets sector under oversight, aligning the country with international financial crime standards set by the Financial Action Task Force (FATF) and supporting its goal to become a regional hub for digital finance innovation.