Kenya’s New Virtual Assets Law and What It Means for the Market
Kenya has taken a decisive step in shaping the future of its digital economy with the enactment of the Virtual Asset Service Providers (VASP) Act, 2025, a landmark law that introduces long-awaited legal clarity for cryptocurrencies, stablecoins, tokenised assets, and the businesses that support them. The Act was assented to on 15 October 2025, gazetted on 21 October 2025, and came into force on 4 November 2025.
To help the public grasp the provisions of the Act, the Virtual Assets Chamber, in collaboration with Vellum, created a foundational explainer video featuring Bill Okello, Director of the Virtual Assets Chamber. The explainer walks viewers through the Act’s main aspects, including the definition of virtual assets, the scope of regulated service providers, and the required operational and governance standards.
In the lead‑up to implementation, Kenya’s industry has also moved to organise itself. More than 50 digital asset firms have come together to launch a unified industry body, the Virtual Asset Association of Kenya (VAAK), established to represent stakeholders, engage constructively with regulators, and help shape the practical rollout of the new licensing and regulatory framework. The association was unveiled at a launch event in Upperhill, Nairobi, with Dr. Peter Onyango appointed as its Chairperson.
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Until now, virtual assets in Kenya operated in a grey area widely used but largely unregulated. Early caution from financial authorities in the mid-2010s discouraged banks and institutions from engaging with crypto-related businesses. However, adoption continued to grow, driven by innovation, cross-border use cases, and a digitally engaged population. By the early 2020s, virtual assets had become mainstream, with national assessments showing widespread awareness and growing ownership. At the same time, international scrutiny increased, particularly following Kenya’s placement on the Financial Action Task Force grey list due in part to gaps in the regulation of virtual asset service providers. These pressures made comprehensive regulation inevitable.
The VASP Act responds by formally recognising virtual assets as digital representations of value that can be transferred, traded, or used for payment or investment. This includes cryptocurrencies, stablecoins, tokenised real-world assets, and certain NFTs used for financial purposes. Importantly, the law also draws clear boundaries. It excludes Central Bank Digital Currencies (CBDCs), mobile money, and NFTs that are purely collectible or confined to closed platforms.
A central feature of the Act is its treatment of Virtual Asset Service Providers, the companies that enable users to interact with virtual assets. These include exchanges, wallet and custody providers, brokers, payment processors, stablecoin issuers, token issuers, ICO platforms, and firms involved in tokenisation. For the first time, these activities are clearly defined and legally recognised, providing certainty to both operators and consumers. The explainer further clarifies how these providers must operate and the governance standards they are expected to meet.
Licensing is now mandatory for any entity offering regulated virtual asset services in or from Kenya. Only companies limited by shares, whether locally incorporated or foreign entities registered under Kenyan law, may apply. Applicants are assessed on corporate governance, capital adequacy, cybersecurity systems, anti-money-laundering controls, consumer protection measures, and the fitness and propriety of directors and senior management. Licensed providers must also seek regulatory approval before making significant changes, such as altering ownership, expanding services, or appointing new executives.
Oversight under the Act is shared between the Capital Markets Authority, which supervises exchanges, brokers, trading platforms, tokenisation, and investment-related activities, and the Central Bank of Kenya, which regulates wallet providers, payment processors, and stablecoin issuers. This dual-regulator model reflects Kenya’s existing financial architecture and ensures oversight is aligned with institutional expertise.
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The Act places strong emphasis on operational integrity. Virtual asset service providers must maintain proper board structures, segregate client assets from company funds, submit audited financial statements, implement robust cybersecurity controls, and manage conflicts of interest. Anonymity-enhancing services such as mixers and tumblers are also expressly prohibited. This provision largely gestures the country’s commitment to transparency and global anti-money-laundering standards.
