What the Virtual Asset Service Providers Bill 2025 means for Kenya’s Digital Space
- David N. Sarinke
- 13 minutes ago
- 4 min read
Introduction
Kenya is in the advanced stages of making vital strides towards the regulation of the digital space, with the proposed Virtual Asset Service Providers Bill 2025 (the Bill). This marks a significant milestone for Kenya’s digital future by formally embracing digital markets like Cryptocurrency and platforms like Binance. This legislation aims to play an oversight role in Kenya’s growing digital assets ecosystem.
The Bill, which was tabled for first reading in Kenya’s National Assembly on 8th April 2025, contains a raft of provisions that form the regulatory framework to monitor the increased use of Virtual Assets in Kenya.
Key Provisions of the Bill
We highlight some of the vital provisions of the Bill below:
Definitions
The Bill defines “Virtual Asset” to mean a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes, and does not include digital representation of fiat currencies, e-money, securities and other financial assets. The digital currencies that are used for trading, payment or investment purposes include Stablecoin, Central Bank Digital Currency (CBDC), crypto assets (also sometimes referred to as Cryptocurrencies) and electronic money (e-money).
Further, the Bill defines a Virtual Asset Service Provider (VASP) to mean a local company incorporated under Kenya’s Companies Act 2015 or a foreign company issued with a Certificate of Compliance under Kenya’s Companies Act. Some of the functions of VASPs include;
providing storage for virtual assets on behalf of others and facilitating exchanges or transfers;
providing a digital online platform facilitating virtual asset transfers and exchanges;
providing a platform for the matching of buyers and sellers for trading of virtual assets, while holding virtual assets on behalf of their clients;
arranging transactions involving virtual assets and fiat currency, or between virtual assets;
facilitating the exchange between one or more forms of virtual assets through a virtual asset exchange and virtual asset wallet providers for and on behalf of clients, which may include retail, institutional investors, or funds (brokerage service);
provision of investment advice on virtual assets, initial virtual asset offerings and non-fungible tokens for and on behalf of clients;
managing portfolios in accordance with mandates given by clients on a discretionary basis, where such portfolios include one or more virtual assets;
issuing and selling virtual assets to the public;
converting real-world assets (like real estate, art or commodities) into digital tokens on a blockchain; and
holding of a virtual asset by a third party in trust until all parties have successfully met the transactions obligations.
Licensing of VASPs
The Bill designates the Central Bank of Kenya (the CBK), the Capital Markets Authority (the CMA) and any other regulatory body appointed by notice in the Kenya Gazette, as the regulatory bodies for the operations of the VASPs. These bodies shall be responsible for the approval, licensing and regulation of the operations, and the carrying on of the business of VASP shall be prohibited without a valid license issued by the relevant regulatory authority.
Any company intending to carry on the business of virtual asset services shall submit an application for a license to the relevant regulatory authority and the regulatory authority may grant a license or reject an application where an applicant fails to meet the applicable licensing requirements. The regulatory authority shall consider factors such as; whether the applicant is eligible to offer virtual asset services, has personnel with the necessary skills, knowledge and experience, whether the applicant is capable of complying with consumer protection and data protection requirements and whether it is capable of complying with any financial obligations such as insurance, capital and solvency requirements.
Upon the issuance of a license, the regulatory authority shall publish a notification in the Kenya Gazette of the issuance of the license, which shall be valid from the date it is issued and expire on the 31st December of the year it is issued. Upon expiry, VASPs shall apply for renewal of their licenses.
Duties of VASPs
The Bill places an obligation on the licensee not to appoint directors who are unfit to hold office and also explicitly states that the activities of a VASP shall be operated from a registered office in Kenya, and its business and affairs shall be managed by a board consisting of at least two directors. The Bill also provides that a VASP shall conduct its business with integrity at all times shall and ensure that it has in place policies and procedures
Other Highlights of the Bill
Money Laundering, Terrorism Financing and Proliferation Financing by VASP
The relevant regulatory authority shall conduct onsite inspection, surveillance and vet significant shareholders, beneficial owners, directors and senior officers of a VASP for AML/CFT/CPF purposes.
Initial Virtual Asset Offering
A person shall not raise funds in or from Kenya on any trading platform without the approval of the relevant authority.
The Implications of the Bill
It shall now be compulsory for any entity carrying out the business of a VASP to be licensed for them to legally operate in Kenya. For any entities that are already carrying out business in Kenya, it will be required to comply with the Bill by obtaining a license within six months of the Bill being promulgated into law.
Further, the Bill explicitly prohibits a natural person from carrying on or purporting to carry on, in or from within Kenya, the business of virtual asset services, and hence only entities incorporated under Kenya’s Companies Act shall be licensed to carry out the business of a VASP.
In addition, prospective VASPs should ascertain that the services they intend to offer are permissible under the proposed law and must comply with the existing Consumer Protection, Data Protection and Anti-Money Laundering Laws.
Conclusion
The Bill is still in its nascent stages of enactment, having only been read once in the National Assembly. Consequently, its provisions are subject to change following public participation and consideration by the appropriate committees of the National Assembly.
Please note that this is not legal advice and is intended primarily for information purposes. If you require tailored advice or further information, please contact us on sarinke@mckayadvocates.com.
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