Key Highlights
- Virtual asset service providers face new licensing and reserve mandates under proposed 2026 framework.
- Treasury accepting stakeholder input through April 10 before finalizing regulations.
- Digital currency issuers required to maintain 30% of reserves in domestic financial institutions.
- Levy structure proposed: 0.05% on token transactions, 0.5% on initial offerings.
- Proposed legislation broadens asset definitions, mandates audits, and establishes inter-agency coordination.
The Kenyan National Treasury released proposed cryptocurrency legislation this Wednesday, establishing comprehensive frameworks for licensing, capital reserves, and transparency obligations. The proposed regulations target virtual asset service providers within the 2026 legislative framework. A public consultation period remains active through April 10, allowing stakeholders to influence the final regulatory structure.
This regulatory initiative follows Kenya’s placement on the 2024 Financial Action Task Force grey list. Officials seek to close identified deficiencies in anti-money laundering protocols and terrorism financing prevention mechanisms. The proposed framework establishes concrete operational standards designed to enhance market credibility and investor protection.
The Treasury developed the draft regulations through collaborative efforts with the Central Bank of Kenya and Capital Markets Authority. This coordinated strategy integrates multi-institutional expertise with international regulatory benchmarks. Interested parties may examine documentation and provide written submissions during scheduled public engagement sessions.
Enhanced Licensing Framework and Expanded Asset Classifications
The proposed crypto law extends licensing eligibility beyond traditional companies to encompass limited liability partnerships. Regulatory bodies commit to processing applications within a 90-day timeframe. License validity periods shift to 12-month terms beginning from the grant date, replacing the previous December 31 expiration schedule.
The legislation introduces an expanded definition of virtual assets, encompassing any digital value representation connected to tangible assets. The issuer classification now covers both individual persons and corporate entities engaged in public distribution or creation of crypto-assets. These broader parameters address evolving token structures and decentralized distribution frameworks.
Every virtual asset service provider must establish and operate a banking relationship within Kenyan financial institutions. Comprehensive system evaluations are mandated biennially, focusing on cybersecurity protocols, data protection measures, and operational stability. Qualified IT security professionals will execute these compliance assessments.
Capital Preservation Rules and Fee Structure Unveiled
Under the proposed regulations, stablecoin operators must allocate a minimum 30% of customer funds to segregated accounts within Kenyan banking institutions. Additional reserve holdings must consist of secure, minimal-risk domestic instruments meeting high-quality liquid asset criteria. Acceptable reserve vehicles include physical currency, central bank deposits, short-duration government bonds, and repurchase transactions.
The framework introduces transaction-based assessment mechanisms for digital asset service providers. Platform operators facilitating token issuance would remit a 0.05% transaction charge, while initial virtual asset offering facilitators face a 0.5% assessment. These charges are structured to support regulatory oversight while preserving operational viability.
The Treasury organized 11 regional consultation events spanning Mombasa, Kisii, Kisumu, Makueni, Kirinyaga, Kakamega, Garissa, Kitale, Meru, Nakuru, and Nairobi. These forums facilitate direct engagement with industry stakeholders, consumer advocates, and community representatives. Collected insights will inform regulatory adjustments prior to implementation.
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