Kenya's crypto sector stares at shake-up with new bill

Kenya will now be able to regulate the cryptocurrency and digital asset space if the Virtual Asset Service Providers (VASP) Bill 2024 is made law.

The bill, now before Parliament, proposes to license and regulate all entities dealing in virtual assets, such as cryptocurrency exchanges, digital wallet services, and custodians.

Under the proposed law, it will be illegal to offer these services without approval from the Capital Markets Authority (CMA)

In the bill, “virtual assets” are defined broadly to include digital representations of value used for payment, investment, or transfer — including cryptocurrencies.

It introduces mandatory Know Your Customer (KYC) and anti-money laundering (AML) procedures, as well as clear consumer protection standards, such as transparency in fees, risk disclosures, and fund segregation.

For everyday users, this potentially marks a turning point in an industry long plagued by fraud, scams, and a lack of accountability.

Licensed platforms will be required to act more transparently, offering greater recourse when things go wrong.

The bill also seeks to align Kenya with international standards set by the Financial Action Task Force (FATF) — a move aimed at improving Kenya’s standing in the global fintech ecosystem and curbing the use of virtual assets for money laundering, terrorism financing, and other illicit activities.

However, as with any regulation, the bill comes with trade-offs. Startups and smaller players may struggle to meet the financial and administrative demands of compliance, which include registration fees, regular audits, and reporting obligations to both the CMA and the Financial Reporting Centre (FRC).

While the bill provides transitional provisions to allow existing service providers time to adapt, non-compliance will be costly. Individuals could face fines of up to Sh3 million, while companies could be penalized up to Sh10 million.

If passed, the VASP Bill would mark Kenya’s first serious attempt at bringing order to its growing but volatile virtual asset market. Whether it leads to a safer investment environment or chokes a quickly growing industry remains to be seen.