Legislation aimed at controlling Virtual Asset Service Providers (VASPs) presented to Kenyan parliamentarians

Legislation aimed at controlling Virtual Asset Service Providers (VASPs) presented to Kenyan parliamentarians

In a significant move towards embracing digital assets, the Kenyan National Treasury unveiled draft guidelines for Virtual Asset Service Providers (VASPs) in December 2024, calling for public input on imminent crypto regulations [1]. This shift in approach comes after increased crypto activity in the country, driven by the launch of decentralized ID protocols like Worldcoin and various crypto scams such as the Argo and BTCM schemes [2].

The Virtual Assets Service Providers Bill 2025, presented to Kenyan legislators on April 4, aims to establish a robust regulatory framework for VASPs [3]. Under this new legal regime, all entities offering services related to virtual assets, including wallet provision, exchange services, payment processing, investment advisory, and initial coin offerings (ICOs), must obtain a license from the Capital Markets Authority and the Central Bank of Kenya [1][3].

The Bill mandates stringent measures to ensure compliance and consumer protection. VASPs must maintain accurate records, conduct rigorous customer due diligence, report suspicious transactions, and adhere to data protection and consumer protection standards [1]. To combat money laundering and terrorism financing, the Bill emphasizes robust anti-money laundering (AML) and countering the financing of terrorism (CFT) measures, requiring VASPs to implement strong internal risk management systems and resilient cybersecurity frameworks aligned with Kenyan legal standards [1].

Regarding ICOs, these are now included within the scope of services regulated under the Bill. This means that ICOs must adhere to the same licensing requirements, AML/CFT compliance, and regulatory oversight imposed on other virtual asset activities [1]. The Bill also introduces minimum capital requirements and operational standards, further formalizing and professionalizing the industry [3].

Licensed VASPs must have physical offices in Kenya and implement AML/CFT measures [3]. This move signifies Kenya's commitment to fostering a legitimate and regulated virtual asset industry.

Nigeria is not far behind, having opened a sandbox for VASPs and issued provisional licenses to two firms last year [2]. South Africa is the most advanced African country in the process of licensing VASPs, having issued more than 240 licenses [2]. However, other African countries such as Morocco and Ghana are still in the process of creating legal rules to guide crypto usage [2].

This new regulatory framework in Kenya is expected to foster innovation while ensuring compliance and consumer protection in the virtual asset space [3]. It marks a significant step forward in Kenya's approach to digital assets, a departure from the soft ban imposed in 2015 and warnings to financial institutions to avoid cryptocurrencies [2].

[1] Capital Markets Authority (CMA) and Central Bank of Kenya (CBK) [2] Kenyan National Treasury [3] Virtual Assets Service Providers Bill 2025 (VASP Bill)

1. As Nigeria follows Kenya's lead, it opens a sandbox for Virtual Asset Service Providers (VASPs) and issues provisional licenses, seeking to establish a similar regulatory environment.
2. In Africa, South Africa is the most advanced country in the process of licensing VASPs, having issued over 240 licenses, setting a precedent for other African nations.
3. The African countries of Morocco and Ghana are currently in the process of creating legal rules to guide cryptocurrency usage, emulating the approach taken by Kenya and South Africa.
4. The Virtual Assets Service Providers Bill 2025 (VASP Bill) introduced in Kenya mandates strict measures for combating money laundering and terrorism financing, requiring VASPs to implement robust anti-money laundering (AML) and countering the financing of terrorism (CFT) systems.
5. Digital assets in Kenya are subject to rigorous regulation, as the Bill requires VASPs to maintain accurate records, conduct thorough customer due diligence, and adhere to data protection and consumer protection standards.
6. Apart from Kenya's initiative, the adoption of blockchain technology and the regulation of digital assets, such as bitcoin, in the African finance sector is a burgeoning trend, with various African countries seeking to capitalize on the potential benefits of crypto and decentralized digital assets.

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