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Kenya’s parliament is pushing forward on landmark legislation to regulate its fast-growing blockchain and cryptocurrency industry, seeking to bring order to a sector where more than six million Kenyans traded close to $2 billion over the past year.
Lawmakers began the Second Reading of the Virtual Asset Service Providers Bill in June and has gone through a 15-member committee stage, with a law expected to be in place by the end of the year. The proposed law requires all digital asset service providers, including crypto exchanges and wallet operators, to obtain licences from local regulators, introduce anti-fraud and anti-money laundering safeguards, and implement strict consumer protections.
Kenya now ranks third in Africa for on-chain cryptocurrency transactions, helped by high mobile phone penetration, a booming developer scene and a youthful, tech-forward population. But repeated scams and the collapse of unregulated platforms like Bitstream Circle in 2023, which left thousands out of pocket, have created urgent calls for oversight.
“In the last year, Kenya traded US$2 billion in decentralised protocols... We have approximately 6.1 million users,” said Finance Committee Chair and MP for Molo Kuria Kimani while moving the Bill. “I look forward to when public liabilities can be tokenised,” he told parliament, expressing hopes blockchain technology could help address government inefficiencies and ballooning public debt.
Parts II and III of the Bill stipulate that any person or organization providing virtual asset services within or from Kenya must secure a license from an authorized regulatory body, which may be the Capital Markets Authority (CMA), the Central Bank of Kenya (CBK), or a newly established Virtual Assets Regulatory Authority.
Supporters argue that robust oversight will help attract up to $1 billion in foreign direct investment and create 25,000 jobs, while positioning Kenya as an African digital finance leader.
However, the proposed licensing regime and compliance costs have sparked debate over whether heavy-handed rules could harm innovation. “Small start-ups may struggle with the financial and bureaucratic burdens, leading to monopolisation by large firms,” warned MP Naisula Lesuuda.
Privacy and cyber security concerns have been raised too, as the Bill mandates significant data collection and domestic offices for providers. "In 2023, thousands of Kenyans lost millions of shillings when the cryptocurrency platform Bitstream Circle collapsed. It had promised high returns and operated without any regulatory oversight," Kimani said.
National Assembly Majority Leader Kimani Ichung’wah said regulation is vital, warning, “Many are now graduating from their wash wash business into the virtual assets industry and scamming very many Kenyans.” But he noted the law would help tame such practices. “It was not clear how to get your money back from a virtual asset trader if you need to. That is why we are emphasising the consumer protection aspect,” he said.
Industry players say clarity is needed, but overregulation could sap the sector’s vibrancy. “With clear legislation, investor confidence is bound to grow,” said Nairobi-based crypto community moderator Victor Kyalo. But he warned, “Overregulation will create barriers that keep new investors out. Kenya could end up losing its competitive edge.”
Kenya’s regulatory approach draws parallels to its success story with mobile money platform M-Pesa, widely seen as having enabled a digital financial revolution. The government recently scrapped a controversial 3% digital asset tax in favour of a more workable excise duty on crypto service fees, a move industry leaders said showed a willingness to adjust policy for growth.
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