Why cryptocurrencies are getting attention in Kenya

BDDIGITALASSET

The government, through the National Treasury and Economic Planning ministry has drafted the Virtual Assets Service Providers (VASP) Bill of 2025 and invited comments from the public on the Bill.

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The Treasury has proposed regulations, which if passed, will legalise the use and trade of cryptocurrencies in Kenya.

Although digital assets aren’t new, and many jurisdictions globally have chosen to regulate rather than ban them outright, Kenyan authorities have largely steered clear of them. Here is why the government is now interested in regulating the sector.

What are cryptocurrencies?

A cryptocurrency is a digital form of money that is not issued or controlled by any monetary authority and is traded online through digital exchanges and marketplaces. Examples include Bitcoin, Ethereum, USDT, BUSD, among others.

What is the difference between cryptocurrencies and virtual/digital assets?

Cryptocurrencies are virtual or digital assets, but not all digital assets are cryptocurrencies.

Due to the fact that cryptocurrencies are not issued by any monetary authority, financial regulators have refrained from referring to them as ‘currencies’, instead using terms such as virtual assets, digital assets, or crypto assets.

The International Monetary Fund (IMF) has also urged Kenya to view them not as currencies, but as assets.

There are, however, other digital assets that are developed using the same technology employed to make cryptocurrencies (the Decentralised Ledger Technology). Examples are Non-Fungible Tokens and digitised physical assets like real estate, land, gold, among others.

How widespread is the use of virtual assets in Kenya?

It is not clear exactly how many Kenyans own cryptocurrencies, but rough estimates put the figure at between 730,000 and four million, according to data firm Statista and crypto analysis form Tripple A.

Blockchain research firm Chainalysis ranks Kenya 21st out of 155 countries in its Global Cryptocurrency Adoption Index, pointing to a widespread use of these assets.

How is the government paying more attention to these virtual assets?

The government, through the National Treasury and Economic Planning ministry has drafted the Virtual Assets Service Providers (VASP) Bill of 2025 and invited comments from the public on the Bill.

The proposed regulations seek to formally recognise all virtual assets as a legal investment avenue for Kenyan traders, as well as bring companies working in the industry into the regulatory watch of authorities in Kenya.

How will the proposed regulations affect the crypto industry in Kenya?

The proposed regulations are meant to ensure financial stability, market integrity, and to protect Kenya’s financial reputation by combating funding of terrorism and money laundering through use of unregulated and unchecked digital assets.

If passed, the rules will require all companies in the crypto industry to obtain a licence from either the Central Bank of Kenya or the Capital Markets Authority.

Such companies include brokers, exchanges, wallet service providers, payment gateway providers, promoters and issuers of initial coins.

Additionally, the service providers will be needed to employ stricter ‘Know Your Customer’ (KYC) rules in onboarding users, and report transactions exceeding a certain threshold or suspected to be strange to the regulators. With these new rules, the government is expected to know who receives crypto, how much, when, from whom, and where they’re keeping it.

What will the regulations achieve for the government?

Kenya will achieve two main things from these rules. First, it provides a mechanism for the State to initiate the Digital Assets Tax (DAT) introduced in July 2023 in the Finance Act 2023. The DAT is a 1.5 percent tax levied on the total value crypto transactions. Since there were no regulations, the government has been relying on voluntary payment of the tax.

With the regulations, Exchanges facilitating the transactions will be required to report and remit the tax. Lat year, the Kenya Revenue Authority, for the first time, recorded the collection of Sh10 billion from the crypto industry, highlighting the potential of the industry to generate revenues to the national tax bracket.

Secondly, the regulations will help Kenya’s efforts to combat money laundering.

Kenya was grey-listed by the Financial Action Task Force last year, for failing to put adequate anti-money laundering safeguards.

By boosting oversight of the crypto industry, Kenya will corner criminals taking advantage of the lack of oversight of the sector to launder proceeds of crime.

Which other African countries have a semblance of regulations for the crypto sector?

Currently, only South Africa, Botswana, Namibia, Nigeria, and Mauritius have enacted specific regulations for the crypto industry. All regulations require registration of service providers in the industry, aiming at protecting users, promoting integrity in the industry and combating money laundering.

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