The proposed Virtual Assets Bill comes at a time when cryptocurrency has become the talk of the town, with numerous service providers emerging and offering various types of digital currencies. Sophocles made a fitting observation about things that rise quickly and spread rapidly: “Nothing vast enters the life of mortals without a curse.”
The Bill seeks, in a measure, to defy this curse by regulating the cryptocurrency market as it emerges. It targets virtual asset service providers and issuers of initial virtual asset offerings in Kenya, introducing licensing requirements, mandating approval for virtual asset issuances, and regulating auxiliary matters relating to virtual assets.
The Bill Responds to Kenya’s Rapid Cryptocurrency Growth
The adoption of cryptocurrencies in Kenya has risen gradually and steadily, placing the country
among the top-ranked in Africa for crypto adoption. This growth has been driven in part by the
willingness of many young investors to participate in cryptocurrency airdrops, which involve the
free distribution of new crypto tokens to selected users to promote awareness and adoption.
Given the speed of this uptake, and the associated risks, particularly concerning the collection
and processing of personal data, as seen in the Worldcoin case, it has become necessary to
regulate these activities. The Bill aims to ensure compliance both in the issuance of virtual assets and in the operations of virtual asset service providers.
The Bill was introduced in Parliament by the Leader of Majority Hon. Kimani Ichung’wah, on 9
January 2025.
Key Provisions
Licensing Requirements
To be licensed, an applicant must be an eligible person. This means the applicant must be either a local company incorporated under the Companies Act or a foreign company issued with a
Certificate of Compliance under the same Act.
In addition, the applicant must demonstrate the ability to meet various requirements under the
Bill. These include compliance with consumer and data protection laws, satisfaction of insurance, capital, and solvency thresholds, and appointment of directors and principal officers
who are deemed fit and proper, with relevant knowledge and experience in virtual assets.
The regulatory authority may attach conditions to a license if deemed necessary in light of the
nature of the supervision required or the safety and soundness of offering the virtual asset to the
public.
AML, TF, and Reporting Duties
A key aim of the Bill is to prevent money laundering, terrorism financing, and proliferation
financing by virtual asset service providers. In pursuit of this objective, and pursuant to the
Proceeds of Crime and Anti-Money Laundering Act and the Prevention of Terrorism Act, the
relevant regulatory authority is empowered to:
a. Vet shareholders, beneficial owners, directors, and senior officials of a virtual asset
service provider;
b. Conduct on-site inspections and off-site surveillance;
c. Impose sanctions for breaches of AML provisions;
d. Compel the production of relevant documentation;
e. Take such action as necessary to supervise and enforce compliance.
These powers reflect the seriousness with which Kenya intends to treat digital asset regulation
and financial integrity.
Who will be Affected?
Businesses operating in the cryptocurrency, blockchain, or digital token sectors will need to align
their operations with the Bill’s requirements. This includes wallet providers, token issuers, crypto
exchanges, and digital payment platforms. Firms that fail to comply risk being excluded from the
market or subject to enforcement action.
Individual actors, including developers, project promoters, and traders, may also fall within the
scope of the Bill, particularly if they offer services to the public or promote virtual asset offerings.
Foreign operators seeking access to the Kenyan market must establish a compliant legal presence or partner with local entities.
The Bill expressly requires that virtual asset service providers be registered under Kenyan company law or operate through certified branches.
Strategic Considerations and Next Steps
The National Assembly Finance and Planning Committee released its report on the Bill, having
considered the input of stakeholders. We recommend that stakeholders in the virtual assets’
ecosystem take early steps to prepare should the proposed Bill be passed. These include:
a. Reviewing existing or planned virtual asset activities to determine whether they fall
within the definition of a virtual asset service provider or token issuer;
b. Evaluating legal structures and eligibility for licensing under Kenyan law;
c. Developing internal compliance frameworks, particularly in relation to AML/CTF
obligations, data protection, and transaction monitoring;
d. Engaging with legal and regulatory advisors to understand the Bill’s provisions,
timelines, and application procedures.
We further advise stakeholders to monitor developments closely since the final version of the
legislation may include transitional provisions. Early compliance planning will mitigate both
regulatory and reputational risk.
This regulatory update is provided as a general overview and for general information only and
does not constitute legal advice. For tailored guidance, we recommend a formal consultation
with our legal professionals.
