Kenya’s Virtual Asset Bill Could Attract Bitcoin Exchanges, Place Stablecoins Under Central Bank Oversight

• Parliament approved the Virtual Asset Service Provider Bill to regulate crypto licensing and compliance.

• The central bank will license stablecoin issuance while capital markets regulators will license exchanges and trading platforms.

• Licensing includes 100% collateral rules for certain stablecoins, local offices, segregated customer accounts, and independent IT audits.

Kenya crypto bill approved by parliament to regulate virtual assets, licensing and AML rules—COINOTAG explains what changes for firms, investors, and regulators.

By COINOTAG | Published: October 13, 2025 | Updated: October 13, 2025

What is the Kenya crypto bill?

The Kenya crypto bill—formally the Virtual Asset Service Provider Bill—establishes a legal framework for virtual assets, specifying licensing, custody, and anti-money-laundering rules. It names the Central Bank of Kenya as the authority for stablecoin issuance and assigns capital markets regulators responsibility for exchanges and trading platforms.

How does the bill change licensing and oversight?

The bill introduces a matched-authority model where different regulators have discrete responsibilities: the Central Bank of Kenya will handle issuance of stablecoins and related instruments, while the capital markets regulator will license trading venues and intermediaries. The Treasury retains reserve power to re-establish authority if needed. The legislation requires licensed firms to segregate customer assets, hold accounts in Kenyan banks, appoint compliance officers, and undergo independent IT audits. Those measures are designed to align Kenya with international AML/CFT standards as recommended by the Financial Stability Board and the Financial Sector Regulators Forum.

Frequently Asked Questions

What does the Virtual Asset Service Provider Bill require of crypto firms operating in Kenya?

The bill requires licensed virtual-asset providers to maintain a physical office in Kenya, appoint a board of at least three natural-person directors, segregate customer assets, hold Kenyan bank accounts, implement AML/CFT frameworks, and submit to independent IT audits. It also obliges firms to appoint compliance officers and meet data protection rules to ensure local accountability and oversight.

Will the bill affect stablecoin issuers and cross-border stablecoins?

Yes. The bill places stablecoin issuance under the Central Bank of Kenya and introduces a recognition framework for foreign-licensed stablecoins from vetted jurisdictions. Recognized stablecoins would be subject to strict reserve, audit, custody, and 100% collateral requirements and must use licensed Kenyan custodians to ensure full liquidity for redemptions.

Detailed reporting and context

A senior parliamentarian confirmed on Monday that Kenya’s National Assembly passed the Virtual Asset Service Provider Bill last Thursday. Member of Parliament Kuria Kimani, chair of the finance committee, said the legislation aims to provide legal clarity for the digital asset sector and to attract investment into Kenya’s fintech ecosystem.

Kimani said the move positions Kenya to join countries such as South Africa in having explicit laws governing the digital asset industry and stressed that the bill now needs presidential assent. The legislation mirrors regulatory practices observed in the United States and the United Kingdom, according to lawmakers, and reflects Kenya’s long history of fintech innovation, including the M-Pesa mobile payments platform operated by Safaricom.

Provisions aimed at preventing abuse and improving accountability

The bill includes a series of measures to limit abuse associated with unregulated operations. Lawmakers required that all licensed virtual-asset providers keep a physical office in Kenya and appoint at least three resident directors, a provision intended to curb shell operations and ensure that decision-makers can be held accountable under Kenyan law. These local-presence rules faced pushback from some industry stakeholders who argued that physical offices are not essential for digital-native businesses.

Lawmakers also incorporated standard prudential safeguards: segregation of customer assets to prevent commingling, mandatory reserve and custody arrangements for recognized stablecoins, and obligations to conduct regular IT audits. The bill further requires firms to keep customer accounts with Kenyan banks, strengthening the interface between crypto firms and the domestic banking system.

Regulatory coordination and international standards

Regulators cited the Financial Sector Regulators Forum and international bodies such as the Financial Stability Board when designing the bill. Those bodies have warned that widespread use of U.S. dollar-backed stablecoins in developing economies could pose monetary stability risks if not properly regulated. Kenya’s framework seeks to balance innovation and investor access with macroprudential safeguards by enforcing strict reserve requirements and supervisory oversight.

Kenyan legislators also considered proposals to permit recognition of foreign-licensed stablecoins from vetted jurisdictions, conditional on rigorous reserve, audit, and custody requirements. The recognition mechanism aims to allow credible foreign stablecoins to operate while reducing systemic risk.

Key Takeaways

• Clear licensing structure: The bill allocates stablecoin issuance oversight to the Central Bank and exchange licensing to capital markets authorities, creating roles and responsibilities for enforcement.
• Local presence and accountability: Mandatory Kenyan offices and resident directors are intended to prevent offshore-only operations and improve legal recourse.
• Investor protections and AML/CFT: Requirements for segregated accounts, independent IT audits, compliance officers, and strict reserve rules for stablecoins aim to align Kenya with global standards.

Conclusion

The passage of the Virtual Asset Service Provider Bill marks a significant step in Kenya’s effort to regulate virtual assets and integrate crypto into the formal financial system. By clarifying licensing responsibilities, imposing local-presence requirements, and aligning rules with international AML/CFT guidance, the law aims to attract responsible investment while protecting consumers and preserving monetary stability. COINOTAG will monitor presidential assent and implementation details from regulators and publish updates as the licensing regime is enacted and enforced.

Sources (plain text): Parliamentary statement by MP Kuria Kimani; Financial Sector Regulators Forum; Financial Stability Board; Central Bank of Kenya; Kenyan Treasury.