More than six million Kenyans using digital assets now face formal regulation for the first time, as the government rewrites its approach to a fast-growing sector.
The shift is driven by Kenya's placement on the Financial Action Task Force (FATF) grey list on February 23, 2024, over weaknesses in anti-money laundering and counter-terror financing controls.
The move raised due diligence costs on financial institutions, strained correspondent banking relationships and exposed gaps in oversight of the crypto industry.
Parliament enacted the Virtual Asset Service Providers (VASP) Act in October 2025.
The National Treasury followed with draft regulations in March 2026 aimed at aligning the country with FATF requirements in a bid to secure removal from the grey list, where it remains as of February 2026, with the FATF saying outstanding reforms are still required.
The framework introduces licensing for virtual asset service providers, customer due diligence requirements and mandatory reporting of suspicious transactions to the Financial Reporting Centre (FRC).
Unlicensed operators face fines of up to Sh10 million and prison terms of up to 10 years.
Capital requirements range from Sh30 million for brokers to Sh500 million for stablecoin issuers, raising concerns among industry players about market entry barriers.
Only locally incorporated companies qualify for full licences, requiring foreign platforms serving Kenyan users to establish local entities or scale back operations.
The market has grown despite years of Central Bank of Kenya (CBK) warnings that digital assets are not legal tender and carry fraud and financial instability risks.
By 2024, more than 6.1 million people, about 10.7 per cent of the population, held digital assets.
Stablecoin transactions processed through local networks reached about $3.3 billion (Sh426.2 billion) in the 12 months to June 2024.
Bybit's 2025 World Crypto Rankings placed Kenya fifth globally by transaction volume, ahead of formal regulation taking effect.
The VASP Act creates a dual regulatory structure, with the Central Bank of Kenya (CBK) overseeing stablecoin issuers and custody services while the Capital Markets Authority (CMA) regulates exchanges, brokers and trading platforms.
Licensed firms must separate customer funds from operational accounts, conduct know-your-customer checks, monitor transactions and submit to regular audits.
The framework aligns with global anti-money laundering standards but raises questions over enforcement capacity, given the speed at which the sector evolves.
"The Act marks a shift for the country's digital economy. It brings virtual asset businesses into the formal regulatory framework through licensing, governance standards and alignment with anti-money laundering rules," said Bowmans law firm.
Industry participants have welcomed regulatory clarity but warned that high capital requirements could squeeze out smaller firms and push activity offshore.
"The direction is correct," said Nairobi-based financial analyst Aly-Khan Satchu, adding, "Compliance with FATF requirements is critical if the country is to attract international capital and deepen its financial markets."
The Virtual Asset Association of Kenya, which represents more than 50 crypto firms, has supported the reforms while calling for adjustments to capital and compliance thresholds.
Global exchange Binance says it processed more than 71,000 law enforcement requests in 2025 and helped prevent more than $2.4 billion (Sh309.9 billion) in potential user losses in the first half of 2024 through its monitoring systems.
“At Binance, protecting our users is at the core of everything we do. We continue to strengthen our compliance and security systems to help create a safer trading environment, while working closely with regulators and law enforcement to support trust and long-term growth of the digital asset ecosystem in Kenya,” said Larry Cooke, Africa Head of Legal at Binance.
Kenya has expanded enforcement capacity through a multi-agency taskforce, a Directorate of Criminal Investigations (DCI) crypto crime unit and blockchain forensics training supported by the European Union.
The regulatory push mirrors moves elsewhere on the continent. South Africa exited the FATF grey list in October 2025 after implementing a 22-point reform programme covering money laundering prosecution, beneficial ownership transparency and institutional enforcement, which included bringing more than 240 crypto firms under formal licensing.
Nigeria passed the Investment and Securities Act in 2025 to bring digital assets under securities regulation.
The International Monetary Fund, which supported the CMA between 2024 and 2025, has urged alignment with global anti-money laundering standards to restore confidence in cross-border financial flows.
Final regulations are expected in the coming weeks after public consultation closed on April 10, 2026. How tightly the sector is regulated will determine whether Kenya can balance oversight with the continued growth of the digital asset economy.
