Kenya’s cryptocurrency market has grown rapidly in recent years, driven by a young, tech-savvy population and a strong mobile money infrastructure. While crypto adoption continues to soar, the legal framework has lagged behind, creating uncertainty for users and businesses. Currently, cryptocurrencies are not illegal in Kenya but are not recognized as legal tender, meaning the Kenya Shilling remains the only currency legally required for payments. The Central Bank of Kenya (CBK) has repeatedly issued public advisories warning about crypto’s risks, including volatility, lack of consumer protection, and potential use in illicit activities. Despite this, individuals cannot be arrested merely for trading or holding crypto, though law enforcement may investigate fraud or money laundering cases related to virtual assets. The unclear legal landscape has historically made it difficult for local exchanges to access banking services and for users to seek recourse in case of platform failures.
Oversight of Kenya’s crypto ecosystem is divided among several institutions. The CBK regulates payment systems and advises financial institutions to avoid crypto-related transactions. The Capital Markets Authority (CMA) oversees crypto assets that resemble securities, particularly in token offerings, through a regulatory sandbox that allows controlled experimentation. The Kenya Revenue Authority (KRA) handles taxation, recently replacing the controversial 3% Digital Asset Tax with a 10% excise duty on exchange fees, simplifying compliance and encouraging innovation. These measures signal a move toward clearer, more practical regulation, though challenges remain, particularly for startups navigating licensing, compliance, and banking access. Established firms like Pesabase and AZA Finance demonstrate that strategic planning and international partnerships can help crypto businesses thrive despite these hurdles.
The Virtual Asset Service Providers (VASP) Bill, 2025, promises to formalize Kenya’s crypto sector, providing licensing, regulatory oversight, and anti-money laundering measures. By requiring VASPs to maintain physical offices, adhere to consumer protection standards, and implement KYC procedures, the bill aims to reduce fraud while fostering innovation. The legislation is expected to increase legitimacy for exchanges, enhance security for users, and attract institutional investment, positioning Kenya as a potential hub for digital finance in Africa. Combined with ongoing discussions around a Central Bank Digital Currency, these initiatives reflect Kenya’s cautious yet optimistic approach, seeking to balance innovation, investor confidence, and consumer protection in a rapidly evolving digital economy.