Kenya, one of Africa’s most active crypto markets, is taking significant steps towards regulating cryptocurrencies and digital assets with the introduction of the Virtual Asset Service Providers Bill 2025.

This proposed regulatory framework aims to establish licensing rules for stablecoins, Initial Coin Offerings (ICOs), crypto exchanges, digital wallets, and investment advisors.

The move marks a policy shift in a country where cryptocurrency adoption is on the rise, but concerns over security and fraud remain.

The bill proposes a dual regulatory system with the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) sharing oversight responsibilities.

CBK would regulate wallet providers, stablecoin issuers, and crypto payment processors, while CMA would focus on exchanges, tokenisation platforms, investment advisors, brokers, and virtual asset managers.

This division of roles ensures that both financial stability and consumer protection are prioritised across different segments of the crypto market.

Regulating ICOs: Protecting Investors and Ensuring Transparency

A key component of the bill is the regulation of Initial Coin Offerings (ICOs). ICOs allow companies to raise funds by issuing digital tokens in exchange for capital, a process that has gained popularity in recent years.

However, the ICO market has also been characterised by fraud and failed ventures, leaving many investors vulnerable.

The bill seeks to address this issue by requiring companies issuing ICOs to obtain CMA approval, provide detailed disclosures about the project, and adhere to rules similar to those governing Initial Public Offerings (IPOs) on the stock market.

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This regulation aims to protect investors by ensuring that ICOs are transparent and reliable, reducing the risks associated with fraudulent offerings.

Stablecoins: Ensuring Stability and Reducing Risks

Stablecoins, digital currencies pegged to real-world assets like the US dollar, have grown in popularity for cross-border payments and remittances.

In Kenya, stablecoins are becoming integral to the digital economy, but their rise brings concerns over systemic risks, such as market manipulation and the stability of the assets backing the tokens.

The proposed bill introduces licensing and reserve requirements for stablecoin issuers, including regular audits and governance measures.

These regulations aim to ensure that stablecoin issuers maintain adequate reserves and operate transparently, minimising risks to users and the broader financial system.

The growth of stablecoins is particularly significant in Kenya, where they are increasingly used for remittances and digital payments.

By regulating stablecoins, the government aims to provide a more secure and stable digital payments infrastructure, enhancing consumer confidence and encouraging further adoption of these digital assets.

Tokenisation: Opening New Investment Opportunities

The bill also addresses tokenisation, a process that converts real-world assets, such as land or artwork, into digital tokens on the blockchain.

Tokenisation has the potential to democratise investment by allowing fractional ownership of assets, making it easier for individuals to invest in high-value assets.

However, the tokenisation process also raises concerns about asset verification and potential fraud. To mitigate these risks, the bill mandates that tokenisation platforms register with the CMA and disclose how assets are valued, stored, and transferred.

These measures will ensure greater transparency in the market, reduce the likelihood of fraud, and protect investors from misleading or fraudulent tokenised assets.

A Shift in Kenya’s Crypto Policy

Kenya’s approach to cryptocurrency has evolved significantly over the past decade. In 2015, the CBK issued a public warning about the risks of cryptocurrencies due to regulatory uncertainties.

However, as the digital asset market grew, Kenya’s position shifted. By 2023, nearly 47% of Kenyan consumers were reported to own cryptocurrency, with stablecoin transaction volumes across Africa surpassing $30 million in the year leading up to July 2023.

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The increasing popularity of cryptocurrencies, combined with the risks posed by an unregulated market, has driven the government to take action.

The introduction of the Virtual Asset Service Providers Bill 2025 seeks to strike a balance between innovation and consumer protection.

By providing clear guidelines for ICOs, stablecoins, and tokenisation, the bill aims to create a safer environment for both investors and businesses.

This regulatory framework could boost investor confidence, attract blockchain-based innovation, and ensure that the market remains secure and trustworthy.