Is Crypto Legal in Kenya? Here’s What You Should Know
Cryptocurrency in Kenya is booming, with over 6 million Kenyans holding digital assets like Bitcoin and Ethereum, representing 2.3% of the nation’s GDP in Bitcoin alone.
Ranking 5th globally in peer-to-peer (P2P) crypto trading and 21st in crypto adoption according to Chainalysis 2023, Kenya is a regional blockchain powerhouse.
Yet, the question remains: Is cryptocurrency legal in Kenya in 2023? This blog breaks down the Central Bank of Kenya’s crypto position, the Kenya 3% digital asset tax introduced in the 2023 Finance Act, and the proposed Virtual Assets Service Providers (VASP) Bill 2025.
We’ll clarify what’s allowed, highlight grey areas, and explore future Kenya crypto regulation trends, ensuring you have the insights needed to navigate this dynamic market.
The Central Bank of Kenya’s Cautious Stance on Crypto
The Central Bank of Kenya (CBK) has historically approached cryptocurrencies with caution. In 2015, the CBK issued a public notice warning against virtual currencies like Bitcoin, citing risks such as money laundering, terrorism financing, and high volatility due to their decentralised nature and lack of regulatory oversight.
The CBK’s Banking Circular No. 14 of 2015 advised financial institutions against dealing with virtual currencies or entities involved in them, effectively imposing a “soft ban”.
In 2022, then-CBK Governor Patrick Njoroge described calls to convert Kenya’s reserves to crypto as “craziness,” emphasising that digital assets are volatile and lack practical utility.
However, the CBK crypto stance in Kenya has softened. By 2022, the Joint Financial Sector Regulators Forum, including CBK and the Capital Markets Authority (CMA), recommended forming a technical committee to develop crypto regulations, signalling a shift toward oversight rather than outright prohibition.
A 2024 CBK Innovation Survey revealed that 31% of Kenyan banks are “highly likely” to engage with virtual assets like Bitcoin, Ethereum, and NFTs, citing their potential to enhance financial access for the unbanked.
This evolving CBK crypto policy Kenya 2023 reflects Kenya’s desire to balance innovation with financial stability.
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The 2023 Finance Act: Understanding Kenya’s 3% Digital Asset Tax
The Kenya Finance Act 2023 crypto tax marked a significant shift in Kenya’s crypto landscape. Effective September 1, 2023, the Finance Act introduced a 3% digital asset tax (DAT) on income from the transfer or exchange of digital assets, including cryptocurrencies and NFTs.
The tax applies to all transactions, regardless of profitability, and is withheld by platforms or facilitators, who must remit it to the Kenya Revenue Authority (KRA) within five working days.
For example, a $10,000 Bitcoin transaction incurs a $300 tax. Additionally, a 1.5% digital service tax (DST) applies to non-resident crypto platforms operating in Kenya, while a 20% excise duty is levied on commissions and fees for crypto transactions.
The Kenya 3% digital asset tax explained sparked debate. Regulators argue it provides clarity and revenue, with the KRA collecting $78 million from crypto transactions in the last financial year.
However, stakeholders, including the Blockchain Association of Kenya (BAK), warn that the tax could discourage innovation and drive traders to unregulated platforms.
In response, the National Treasury proposed halving the DAT to 1.5% in the 2025 Finance Bill to align with the turnover tax for small businesses, following advocacy from crypto companies.
The KRA is also developing APIs for real-time transaction monitoring to curb tax evasion and illicit activities.
The Virtual Assets Service Providers (VASP) Bill 2025: A New Era?
The VASP Bill Kenya represents Kenya’s first comprehensive attempt to regulate cryptocurrencies.
Tabled by the National Treasury in 2025, the Virtual Assets Service Providers Bill 2025 requires crypto exchanges, wallet providers, and other VASPs to obtain licenses from the CBK, CMA, or Communications Authority (CA), depending on their activities. Key provisions include:
- Licensing Requirements: VASPs must register local offices, hire directors, and secure regulatory approval. Existing providers have six months to comply, facing fines up to KSh 20 million or 10 years’ imprisonment for non-compliance.
- Anti-Money Laundering (AML) and KYC: The bill mandates strict AML and Kenya crypto consumer protection measures, requiring VASPs to disclose user identities and ban crypto mixers to prevent illicit fund flows.
- Consumer Protection: VASPs must maintain transparent terms, segregate customer funds, and meet cybersecurity standards to protect users.
- ICOs and Taxation: Only licensed platforms can issue Initial Coin Offerings (ICOs) after regulatory approval, and the bill retains the 3% DAT, with potential reduction to 1.5%.
The Blockchain Association of Kenya VASP draft played a key role, as BAK was tasked by parliament in 2023 to draft the bill, aiming to balance innovation and oversight.
Treasury Secretary John Mbadi emphasised, “Kenya’s financial sector is a beacon of innovation… The Government is committed to creating the necessary legal and regulatory framework to leverage opportunities presented by VAs and VASPs while managing risks.”
What’s Allowed and Grey Areas in Kenya’s Crypto Market
What’s Allowed:
- Trading and Holding Crypto: Cryptocurrencies are not illegal in Kenya, and individuals can buy, sell, or hold assets like Bitcoin and Ethereum on platforms like Paxful or Kotani Pay, which integrates with M-Pesa crypto integration Kenya.
- P2P Trading: Kenya’s high ranking in P2P crypto trading (5th globally) reflects its active use for remittances and investments, often via mobile apps.
- Tax Compliance: Traders must report transaction details to the CMA for taxation, paying the 3% DAT on transfers or exchanges.
Grey Areas:
- Unregulated Platforms: Many crypto exchanges operate without licences, creating risks of scams and fraud, as noted by the Directorate of Criminal Investigations in 2023. The VASP Bill aims to address this by mandating licensing.
- Legal Tender Status: Crypto is not legal tender in Kenya, and the CBK does not recognise it as currency, limiting its use in formal transactions.
- Tax Disputes: The 3% DAT’s constitutionality remains under review in the High Court, creating uncertainty for traders.
Future Kenya Crypto Regulation Trends
Kenya’s crypto market, valued at KSh 2.4 trillion (20% of GDP) from 2021 to 2022, is set for growth with the VASP Bill’s implementation. Future trends include:
- Increased Oversight: The CBK, CMA, and CA will enforce stricter AML/KYC rules, aligning with Financial Action Task Force (FATF) standards to exit the FATF grey list.
- Tax Adjustments: The proposed 1.5% DAT in the 2025 Finance Bill could make Kenya more competitive, encouraging adoption.
- Financial Inclusion: With 31% of banks eyeing crypto deals, platforms like the Nairobi Securities Exchange’s Kenya Digital Exchange (KDX) will integrate blockchain for trading assets like equities and commodities.
- Regional Leadership: Kenya aims to lead Africa in crypto regulation, following Mauritius and South Africa, with startups like Kotani Pay and Chipper Cash driving innovation.
The International Monetary Fund (IMF) recommends a comprehensive framework, noting, “The absence of a regulatory framework poses risks to the country,” urging Kenya to enhance financial literacy and inter-agency cooperation.
This aligns with Kenya crypto market regulation trends toward transparency and innovation.
Tips for Kenyan Crypto Users
To navigate Kenya crypto regulations 2023, consider:
- Use Licensed Platforms: Opt for exchanges like Paxful or local startups like Kotani Pay, which comply with KRA’s tax reporting.
- Stay Informed: Monitor updates from the CBK and BAK on the VASP Bill via www.treasury.go.ke or BAK’s social channels.
- Report Taxes: Declare crypto transactions to the KRA to avoid penalties, using APIs for real-time compliance.
- Beware of Scams: Avoid unregulated platforms to mitigate crypto scams Kenya regulations risks, as warned by the DCI.
- Engage with Chamas: Explore Kenya chama crypto regulations by joining community groups using crypto for savings, like Sarafu Network.
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Navigating Kenya’s Crypto Future
The question, Is cryptocurrency legal in Kenya?, has no simple answer, but Kenya’s crypto landscape is evolving. The CBK crypto stance Kenya has shifted from caution to cautious embrace, with the Kenya Finance Act 2023 crypto tax and VASP Bill Kenya crypto regulation 2025 providing clarity.
While grey areas persist, the proposed regulations aim to promote innovation, protect consumers, and position Kenya as a fintech leader, much like its M-Pesa revolution.
As John Mbadi noted, “From the groundbreaking mobile money revolution pioneered by M-Pesa… Kenya has consistently pushed the boundaries of financial inclusion.” Stay ahead by using compliant platforms and engaging with Kenya crypto laws updates to thrive in this dynamic market.
For more insights, visit the National Treasury at www.treasury.go.ke or follow the Blockchain Association of Kenya VASP draft discussions. Share your thoughts on X with #CryptoKenya and #VASPBill to join the conversation!
Ronnie Paul is a seasoned writer and analyst with a prolific portfolio of over 1,000 published articles, specialising in fintech, cryptocurrency, and digital finance at Africa Digest News.