Crypto regulation in Kenya has evolved dramatically from a state of skepticism to one of structured engagement. While cryptocurrency is not considered legal tender in Kenya, the government is working toward a comprehensive legal framework to govern its use, taxation, and licensing.
Today, owning and trading cryptocurrency is permitted, as long as it complies with emerging policies and regulations. This guide explores Kenya’s current crypto regulatory landscape, ideal for investors, businesses, and crypto users looking to remain compliant and informed.
The legal status of crypto regulation in Kenya
Cryptocurrency is legal to own and trade in Kenya. However, it is not recognized as official legal tender, meaning that businesses are not required to accept it for payments. Despite this, the growing adoption of crypto has prompted the government to draft legislation that aims to regulate digital asset services and related activities. These efforts are intended to offer legal protection, enforce compliance, and support responsible innovation in the space.
Regulatory authorities governing cryptocurrency
Kenya’s approach to cryptocurrency regulation is multi-agency in nature. The Central Bank of Kenya (CBK) is responsible for overseeing payment systems and monetary policy, particularly when it comes to crypto used for transactions. The Capital Markets Authority (CMA) handles token sales, securities classification, and exchange licensing. The Kenya Revenue Authority (KRA) manages taxation matters, while the National Treasury leads the development of broader crypto policy. Together, these bodies work to ensure a secure and well-regulated crypto environment.
The VASP Bill 2025 and Kenya’s legal framework for cryptocurrencies
In late 2024, Kenya made a significant move toward structured regulation with the introduction of the Virtual Asset Service Providers (VASP) Bill, 2025. This bill outlines the licensing requirements for crypto service providers such as exchanges, digital wallets, and companies conducting token sales. According to the bill, all virtual asset service providers must register as formal businesses and obtain a government-issued license. Non-compliance could result in fines of up to KES 20 million for companies, while individuals face potential fines of KES 10 million and/or up to 10 years in prison.
Anti-Money Laundering and Know Your Customer compliance
To enhance accountability and combat financial crime, licensed crypto companies in Kenya are now required to implement strict Know Your Customer (KYC) and Anti-Money Laundering (AML) policies. These companies must also report any suspicious activities to the Financial Reporting Centre (FRC), following standards similar to those required of banks and traditional financial institutions. This step helps create a more trustworthy crypto ecosystem while aligning Kenya with international financial regulations.
Cryptocurrency taxation in Kenya
Kenya is preparing to roll out formal tax regulations for cryptocurrency. Under the proposed framework, crypto assets will be treated as capital assets, making them subject to Capital Gains Tax (CGT) when sold or traded for profit. In addition to capital gains, using cryptocurrency for purchases or other taxable transactions may trigger further tax obligations. The Kenya Revenue Authority is expected to enforce tax compliance once the regulations are fully enacted. These measures aim to ensure that crypto gains are reported accurately and taxed fairly.
Regulation of ICOs and STOs
The VASP Bill also addresses the regulation of Initial Coin Offerings (ICOs) and Security Token Offerings (STOs). Under this framework, only licensed and registered companies are allowed to launch tokens. Furthermore, all ICOs and STOs must receive approval from the appropriate regulatory bodies before being marketed or sold to the public. Companies or individuals found misleading investors through false token promotions may face heavy penalties, including fines and legal action. This effort is designed to protect investors from fraudulent schemes and create a transparent token economy.
Crypto usage and limitations in Kenya
While cryptocurrency use has grown rapidly in Kenya, especially in peer-to-peer (P2P) trading, investment, and remittances, it remains outside formal payment systems. Since crypto is not legal tender, businesses are not obligated to accept it. The upcoming regulations will require any crypto payment services to obtain licensing from the Central Bank of Kenya. Unlicensed platforms may be restricted or banned from offering services in the country. These changes will push the market toward more structured and secure operations.
Crypto mining in Kenya
Cryptocurrency mining is currently unregulated in Kenya. While not illegal, mining is not subject to any formal oversight or standards. Due to high electricity costs, mining remains a niche activity, but it has been acknowledged in the draft policies. This indicates that future mining-specific regulations may be introduced to standardize and possibly incentivize the activity within a secure and sustainable framework.
Kenya’s position on Central Bank Digital Currency (CBDC)
In 2022, the CBK released a discussion paper exploring the possibility of introducing a Central Bank Digital Currency (CBDC), also known as the Digital Shilling. However, by 2023, the CBK concluded that launching a CBDC was not a priority due to the effectiveness of Kenya’s existing mobile money infrastructure, particularly M-Pesa. As a result, CBDC development remains on hold, though it may be revisited in the future.
Penalties for crypto offenses
| Offense | Penalty |
|---|---|
| Unlicensed operations | Up to KES 20M fine (companies), KES 10M and/or 10 years imprisonment (individuals) |
| Market manipulation, scams | KES 30M fine or 10 years imprisonment |
| Misleading ICOs | Legal action, possible imprisonment, and fines |
Kenya has laid out strict penalties to discourage crypto-related fraud and ensure compliance with the VASP Bill. Companies operating without a license risk fines of up to KES 20 million, while individuals face penalties of up to KES 10 million or 10 years in jail. Offenses related to scams, pump-and-dump schemes, or market manipulation carry even heavier consequences, including fines of up to KES 30 million or imprisonment for up to a decade. These penalties reflect the government’s commitment to consumer protection and financial integrity.
Government support for blockchain innovation
Kenya is not only regulating but also encouraging innovation through its regulatory sandbox, overseen by the CMA. This initiative allows blockchain startups to test their products under controlled conditions while receiving guidance from regulators. Projects such as Yeshara Tokens, which focuses on property tokenization, and OwnMali, which digitizes real estate ownership, have successfully participated. Additionally, companies like AZA Finance are using blockchain technology to lower remittance costs. The CBK continues to support innovation through hackathons and blockchain pilots in areas like land registries and digital identity systems.
Challenges facing crypto regulation in Kenya
Despite progress, Kenya faces several challenges in enforcing crypto laws. The global nature of cryptocurrency makes it difficult to regulate users who access international platforms outside Kenyan jurisdiction. Fraud and scams have also damaged public perception, with many users falling victim to pyramid schemes and misleading investments. Furthermore, coordination between regulatory bodies such as the CBK and CMA needs improvement to prevent overlaps and confusion, particularly around issues like stablecoins or token classifications. Addressing these issues will require better cross-agency collaboration, public education, and capacity building.
The road ahead: Future of crypto regulation in Kenya
With the release of the National Policy on Virtual Assets and the VASP Bill, 2025, Kenya has signaled its intention to fully regulate the crypto sector. These efforts will likely culminate in a finalized framework by late 2025. The future of crypto regulation in Kenya will include licensed exchanges, formal taxation rules, enhanced investor protection, and stricter enforcement of AML standards. As one of Africa’s fintech leaders, Kenya’s crypto laws may influence regulatory approaches in neighboring countries like Uganda and Tanzania. Regional harmonization of policies is also expected as Kenya aligns with global standards such as the Financial Action Task Force (FATF) guidelines.
Conclusion
The evolution of crypto regulation in Kenya highlights the country’s journey from early warnings to the development of a structured legal environment. With the introduction of licensing, tax obligations, and consumer protection measures, Kenya is setting the foundation for a mature and trusted crypto market. Investors, startups, and users must stay updated and compliant to operate safely and legally. The success of Kenya’s regulatory efforts will depend on how well all stakeholders adapt to these transformative changes.
