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Treasury allows firms to sell digital coins for fundraising
Kenya is tightening oversight of initial coin offerings with new draft rules to regulate fundraising through digital assets.
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The Treasury has issued draft rules guiding how investors will raise funds through initial coin offerings, allowing firms to issue their own digital currencies for investors to buy.
An initial coin offering (ICO) involves a company raising funds by giving investors tokens for their cash or cryptocurrency, such as Bitcoin, as opposed to obtaining shares in the company through a traditional approach, such as an initial public offering (IPO).
The Treasury rules will help regulate the promotion, sale, and distribution of tokens in the pursuit of financial stability and consumer protection
“A person wishing to issue or promote an initial coin offering shall make an application to the relevant regulatory authority for approval,” says the draft regulations seen by the Business Daily.
At the heart of an ICO is the creation of a new “coin” or cryptocurrency that is similar to the most famous of cryptocurrencies, Bitcoin.
Investors who buy into an ICO acquire the new coins at a particular starting price and are backed by a product or service that the company is offering.
The company keeps the entire money initially raised through this sale. And unlike shares, investors do not get any control or say in running the firm.
They simply hope that the price of the new cryptocurrency will increase and, if successful, allow them to sell their investment at a later date.
For the ICO cryptocurrency to be worth anything and increase in value, it must be part of the company’s business model.
If the company’s business succeeds, it follows that the value of the currency will increase because there will be more demand. If demand for the currency rises, the value also increases because its supply is controlled.
It is often compared to an IPO, but the obvious difference is that the public does not get a stake in the business itself.
A buyer of a virtual currency can either hold the coins and realise capital gains in the long run or use them for transactions akin to physical money or digital payments such as M-Pesa.
“The application shall be accompanied by a white paper, the policies and procedures for monitoring the cycle of the issuing and offering of an initial coin offering,” says the draft regulations.
The pitchbook—known as a white paper in the crypto industry—is designed to encourage enthusiasts and supporters to buy some of the project’s tokens.
It must be approved by the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA).
The promoters of the project use their white paper to explain important information related to the ICO, such as what the project being backed by the digital currencies is about, the use of funds and the beneficial ownership of the issuer.
The virtual asset service providers’ regulations follow the passage of the Virtual Asset Service Providers Act earlier in the year, as Kenya sought to address concerns over the lack of clear guidelines to govern the sector.
The Act mandates the Central Bank as the licensing authority for the issuance of stablecoins and other virtual assets, while the capital markets regulator will license those who wish to operate crypto exchanges and other trading platforms.
The country joins others, such as South Africa, as the only African nations with laws that govern the digital assets industry, as Kenya seeks to boost investments in the nascent sector by creating clear rules.
Investors in digital assets have so far issued the instruments outside the regulatory purview, with Kenyan authorities initially warning the public against such offers.
E-commerce platform BlazeBay, a subsidiary of Churchblaze Christian Association, issued a cryptocurrency dubbed Nurucoin in 2018.
Investors shall have 12 months after the approval of an offer to issue digital assets, says the draft regulations.
A crypto project/ICE white paper shall detail the objective or purpose of the offering, the business plan of the issuer and disclose the targeted amount to be raised through the project, and the subsequent application of funds.
Issued virtual assets shall trade in an approved exchange, which shall be a system with real-time public access to trading information, allowing for transparent and efficient price discovery.
Kenya has followed in the footsteps of advanced economies such as the United States in legislating the use of cryptocurrencies.
The United States Congress passed the Genius Act in July 2025, which created a legal framework for the stablecoin industry.
Authorities in Kenya initially warned the public against buying and using virtual currencies in the backdrop of the popularity of Bitcoin, but stopped short of banning their use.
“Virtual currencies such as Bitcoin are not legal tender in Kenya, and therefore no protection exists if the platform that exchanges or holds the virtual currency fails or goes out of business,” the CBK said in a December 2015 statement.
The draft regulations also allow for the issuance of stablecoins backed by both fiat currencies/legal tender, such as US dollars or the Kenya shilling, and other assets, including commodities.
Stablecoins refer to a type of cryptocurrency backed by assets considered reliable, such as the US dollar.
Issuers of stablecoins are also required to issue a whitepaper that details the value and composition of the reserve assets and provides details on the stabilisation mechanism.
Cross-border traders, Kenyans in the diaspora and multinationals have driven the usage of stablecoins in the country for payments, setting the stage for the wider adoption of digital assets.
Stablecoins are viewed as a way to more quickly and cheaply make a range of payments, especially cross-border ones, which under traditional systems can take days to settle and are subject to interchange and other fees.
Kenya made Sh426.4 billion ($3.3 billion) worth of transactions in stablecoins in the year to June 2024, according to Chainalysis, a New York-based blockchain data platform that tracks crypto use.
