Kenya is moving decisively to regulate its digital finance sector with the National Assembly’s approval of the Virtual Asset Service Providers Bill, 2025.
This legislation is designed to provide a clear legal framework for businesses dealing with virtual assets, including cryptocurrencies and digital finance platforms.
Once enacted, the law will formalise the industry, encourage innovation, enhance consumer safety, and give authorities stronger tools to prevent financial crimes.
The Bill now awaits the President’s signature to become operational.
What Are Virtual Asset Services?
The Bill defines virtual asset services as any activity involving the exchange, transfer, safekeeping, or management of virtual assets, which are digital forms of value that can be electronically traded or moved. This includes cryptocurrency exchanges, wallet operators, and platforms that facilitate the buying or selling of digital currencies.
A virtual asset service provider (VASP) is any company licensed under the law to operate in this space within or from Kenya. Only companies registered as limited by shares, whether local or foreign, can apply for a licence.
Individuals and unregistered entities will not qualify. Once the law is in effect, all operators must be licensed by designated regulators, which may include the Central Bank of Kenya, the Capital Markets Authority, or a newly established Virtual Assets Regulatory Authority.
Licensed providers must adhere to strict standards covering consumer protection, anti-money-laundering rules, and data privacy.
The Importance of the Bill
The move comes after repeated calls from the International Monetary Fund for Kenya to create a clear regulatory framework for virtual assets due to risks of financial instability and money laundering in unregulated crypto markets.
Reports suggest over four million Kenyans own at least one form of cryptocurrency, including Bitcoin and Ethereum.
By formalising the sector, the government aims to collect licensing fees while providing a safer environment for investors and users. Kenya joins other financial hubs such as Singapore, Mauritius, and the Cayman Islands, which already have legal frameworks for digital assets.
Consumer Protection and Accountability Measures
Licensed providers will be held to high standards to protect users and maintain financial stability.
Part IV of the Bill requires firms to secure client assets, obtain insurance, and maintain Kenyan bank accounts for easier oversight. Providers must also implement policies to handle conflicts of interest and maintain comprehensive operational records.
These rules are designed to prevent fraud, insider misuse, and operational failures that have affected unregulated digital platforms elsewhere.
Regulatory Authority and Enforcement
Part V of the Bill gives regulators the power to supervise, inspect, and sanction non-compliant operators. It encourages coordination between domestic and international authorities to prevent money laundering, terrorism financing, and other cross-border financial crimes.
The law modernises Kenya’s compliance framework by including counter-terrorism financing and counter-proliferation measures alongside traditional anti-money-laundering rules.
This ensures that Kenya’s approach meets global financial standards and remains compatible with international institutions.
Virtual Service Tokens and Their Role
The Bill clearly separates virtual assets from virtual service tokens. According to the law, “a virtual service token is a digital representation of value that is not transferable or exchangeable with a third party and is used solely to provide access to an application or service.”
In practice, these tokens act like digital passes, granting access to specific products or services but cannot be traded or sold. Examples include in-app credits or reward points used within a single platform.
Companies dealing only in these tokens do not need a licence. This distinction prevents unnecessary regulation of ordinary software or rewards systems while keeping high-risk financial products under strict oversight.
A Safer Digital Finance Future
Once operational, the Virtual Asset Service Providers Act, 2025, will bring order to Kenya’s digital finance landscape. It will legitimise crypto-related businesses, attract investments, and protect consumers who have been operating in largely unregulated markets.
By creating a transparent and secure environment, the law is expected to increase confidence in digital finance and position Kenya as a leader in responsible fintech innovation.
The Bill states its goal is to “promote innovation in digital finance while safeguarding consumers and maintaining the integrity of the financial system.”
With effective implementation, the law will provide structure to a previously unclear market, open new revenue opportunities for the government, and offer Kenyans safer ways to engage in the digital asset ecosystem.