Kenya’s National Assembly and Senate have passed the Virtual Assets and Service Providers (VASP) Act 2026, creating a comprehensive domestic legal framework for cryptocurrency trading, digital asset issuance, and blockchain-based financial services. The legislation, which now awaits presidential assent, positions Kenya as the first East African country — and one of the first on the continent — to enact purpose-built cryptocurrency regulation, ending years of legal ambiguity that had simultaneously limited institutional adoption and exposed retail investors to significant risk.
The bill passed with broad cross-party support following months of committee hearings that drew submissions from technology companies, commercial banks, the CBK, the Capital Markets Authority (CMA), and a vocal community of Kenyan retail cryptocurrency users estimated at over 4 million people. Kenya consistently ranks among the top five countries globally by peer-to-peer cryptocurrency transaction volume, a statistic that underscored the urgency of providing legal clarity.
Key Provisions of the VASP Act
The Act establishes a licensing regime under the CMA for entities operating as virtual asset service providers — defined broadly to include cryptocurrency exchanges, digital wallet providers, token issuers, and digital asset custodians. Applicants must demonstrate minimum capital requirements (set at Ksh 50 million for exchange operators), maintain segregated client funds, implement anti-money laundering and counter-terrorism financing controls aligned with FATF standards, and appoint locally resident compliance officers.
Consumer protection provisions require exchanges to publish real-time prices, maintain reserve proof through regular independent audits, and provide clear risk disclosures before onboarding retail customers. The Act also establishes a compensation fund — modelled loosely on the investor protection framework governing the NSE — that provides limited recourse for retail investors in the event of licensed operator failure.
Notably, the legislation does not give Bitcoin or any other cryptocurrency legal tender status — a step taken by El Salvador and the Central African Republic that the CBK had firmly opposed. Instead, digital assets are classified as property for tax and commercial law purposes, meaning capital gains on cryptocurrency transactions will be subject to income tax at the standard rate.
“This is a landmark moment for Kenya’s digital economy,” said CMA Chairman James Ndegwa. “We are not trying to stifle innovation — we are creating the conditions in which it can flourish safely. With a clear legal framework, institutional investors, pension funds, and banks can now engage with digital assets without regulatory uncertainty hanging over them.”
Industry and Civil Society Reactions
Kenya’s crypto community responded with cautious optimism. BitPesa (now AZA Finance), Kotani Pay, and several domestic blockchain startups welcomed the legislation as overdue, though some argued that the Ksh 50 million capital requirement for exchange licences could squeeze out smaller indigenous operators in favour of well-capitalised international platforms. The Kenya Blockchain and Cryptocurrency Association called on the CMA to establish a regulatory sandbox that allows startups to test products with lighter-touch oversight before graduating to full licensing.
Commercial banks, which have historically been reluctant to provide services to crypto businesses due to regulatory ambiguity and AML concerns, indicated they would review their policies in light of the new framework. Co-operative Bank and NCBA are understood to be evaluating cryptocurrency custody and trading services that could be offered through their existing digital channels — an integration that, if it proceeds, would bring crypto access to millions of M-Pesa and mobile banking users.
The Act also has implications for Kenya’s ambitions as a regional fintech hub. Nairobi competes with Lagos, Kigali, and Cape Town for the title of Africa’s leading technology ecosystem, and a well-designed regulatory framework for digital assets is increasingly seen as a marker of ecosystem maturity that attracts international investment and talent. With the 2028 Los Angeles Olympics — where Kenya hopes to make a digital payments showcase — on the horizon, the government has an additional incentive to ensure the country’s digital finance infrastructure is both innovative and credible.
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