Kenya’s rapidly developing digital asset sector has taken a significant step toward self-regulation and compliance with the formation of a unified industry lobby. Over 50 crypto firms have coalesced to launch the Virtual Asset Association of Kenya (VAAK).
This move comes in direct response to the newly enacted Virtual Asset Service Providers Act (VASP Act), which was assented to in October and is set to formalize the regulatory landscape for cryptocurrencies in the country.
The VAAK’s primary mission is to serve as the main interlocutor between the industry and the government as the Treasury finalizes the subsidiary operational rules for the VASP Act.
Under the new law, oversight of the sector will be handled by a multi-agency framework:
- The Central Bank of Kenya (CBK): Will regulate payment-focused entities, including stablecoin dealers, conversion rails, and custodial services.
- The Capital Markets Authority (CMA): Will focus on virtual asset service providers, crypto exchanges, trading platforms, and tokenized virtual assets.
The incoming regulations are designed to bring the entire crypto ecosystem into the regulatory perimeter, addressing long-standing concerns about opaque, offshore entities. Future licensed VASPs will face several stringent obligations, including:
- Establishing and maintaining a physical office in Kenya.
- Appointing local, natural-person directors.
- Mandatory segregation of customer assets.
- Holding accounts in local Kenyan banks.
- Adhering to strict Anti-Money Laundering/Counter-Financing of Terrorism (AML/CFT) and data-protection rules.
Firms will also face an annual license renewal requirement and heavy penalties, including fines up to Ksh. 25 million, for non-compliance. These measures are expected to accelerate market consolidation and raise the overall compliance standard of the industry.