Blockchain in Kenyan Banking: Regulatory Challenges and Opportunities
How Kenyan banks can use blockchain lawfully: CBK and CMA positions, the virtual asset law, data protection, smart contracts and the regulatory sandbox.
Read articleKenya consistently ranks among the leading African countries for peer-to-peer cryptocurrency trading. Young, mobile-first users buy and sell Bitcoin, stablecoins and other tokens for investment, remittances and protection against currency depreciation. For years, crypto operated in a legal grey zone in Kenya. That has changed. Kenya now has a dedicated legal framework for virtual assets, a tax on digital asset transfers and AML obligations for crypto businesses. This article explains the current status of cryptocurrency regulation in Kenya and what to expect next.
Key takeaways
- Cryptocurrency is not legal tender in Kenya, but owning and trading it is not prohibited.
- The Virtual Asset Service Providers Act, 2025 introduced licensing of crypto exchanges, wallet providers and similar businesses, overseen by the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA).
- Virtual asset service providers are reporting institutions under Kenya's anti-money laundering law.
- A digital asset tax applies to the transfer or exchange of digital assets, and income and gains remain taxable.
- Businesses already operating should plan for licensing, AML compliance and consumer protection requirements.
How Kenya's approach to crypto has evolved
Early warnings (2015–2021)
In 2015, the CBK issued a public notice warning that virtual currencies such as Bitcoin were not legal tender, were not regulated and posed risks to consumers. In 2018, it directed banks not to deal in virtual currencies. The CMA similarly warned investors about initial coin offerings and unregulated crypto investment schemes. During this period, courts handled several crypto-related disputes, including cases about frozen accounts, failed investment schemes and fraud.
Policy shift (2022–2024)
As adoption grew, the government recognised that a total ban was neither practical nor beneficial. The Finance Act, 2023 introduced a digital asset tax, and the AML amendments of 2023 brought virtual asset service providers under AML obligations. Kenya's National Risk Assessment on virtual assets and the FATF grey listing in 2024 added urgency to the need for proper regulation.
A dedicated framework (2025)
The Virtual Asset Service Providers Act, 2025 established Kenya's first comprehensive framework for crypto businesses. It recognises virtual assets as a legitimate asset class and regulates the businesses that provide services in relation to them.
The Virtual Asset Service Providers Act, 2025
Who must be licensed?
The Act requires licensing for businesses that provide virtual asset services in or from Kenya, including:
- virtual asset exchanges and trading platforms;
- custodial wallet providers;
- brokers and dealers in virtual assets;
- virtual asset payment service providers;
- issuers of virtual assets and initial coin offerings; and
- virtual asset investment and advisory services.
Which regulator?
Supervision is split according to the nature of the activity. The CBK oversees payment-related and stablecoin activities, while the CMA oversees exchanges, trading platforms and investment-related activities. Other regulators may be involved where a business falls within their sector.
Core licensing requirements
- local incorporation or registration and a physical presence in Kenya;
- fit and proper directors, shareholders and key staff;
- minimum capital and financial resources;
- segregation and safe custody of customer assets;
- cybersecurity and technology risk management;
- AML/CFT controls, including the travel rule for transfers;
- consumer protection, disclosure of risks and complaints handling; and
- record keeping, reporting and audit.
Operating without a licence is an offence. Existing operators are expected to apply within the transition period set by the regulators. Detailed regulations and guidance from the CBK and CMA will fill in many of the practical requirements, so businesses should monitor these closely.
Taxation of cryptocurrency in Kenya
| Tax | How it applies |
|---|---|
| Digital asset tax | Charged on the value of the transfer or exchange of digital assets, collected and remitted by the platform or the person facilitating the transfer. The rate introduced in 2023 has since been reduced by later Finance Acts. |
| Income tax | Profits from trading or from crypto-related business, mining and staking income, and payments received in crypto are taxable |
| VAT and excise duty | Fees charged by platforms for services may attract VAT or excise duty |
| Withholding and other taxes | May apply depending on the nature of the payment and the parties |
Keep detailed records of all transactions, including dates, amounts, wallet addresses and the value in Kenya shillings at the time of each transaction. Tax rules for digital assets have changed several times since 2023, so confirm the current rates before filing.
AML and consumer protection
Virtual asset service providers must carry out customer due diligence, monitor transactions, report suspicious activity to the Financial Reporting Centre and screen against sanctions lists. Read our AML compliance guide for details. Crypto marketing must not be misleading; promoters of fraudulent "investment" schemes face criminal liability under the Computer Misuse and Cybercrimes Act and other laws, as well as civil claims by investors.
Legal issues for users and businesses
- Banking access: licensing is expected to improve crypto firms' access to banking services, which was previously restricted.
- Contracts: agreements involving crypto are generally enforceable, but parties should define valuation, settlement and what happens if a token loses value or a platform fails.
- Insolvency: segregation of customer assets is critical to protect users if a platform collapses.
- Data protection: platforms must comply with the Data Protection Act.
- Inheritance: holders should plan for how heirs will access their assets, as private keys can be lost forever.
Future outlook
The next few years are likely to bring detailed licensing regulations, rules on stablecoins, closer cooperation with regional regulators and exploration of tokenised securities and real-world assets. Kenya's approach balances innovation with consumer protection and financial integrity, and the firms that engage early with regulators will be best placed to benefit.
Frequently asked questions
Is cryptocurrency legal in Kenya?
Yes. Owning and trading cryptocurrency is not illegal, but it is not legal tender. Businesses offering crypto services must comply with the licensing regime under the Virtual Asset Service Providers Act, 2025.
Do I pay tax on crypto profits in Kenya?
Yes. Profits and income from crypto are taxable, and the digital asset tax applies to transfers made through platforms.
Can a foreign crypto exchange serve Kenyan customers?
Businesses providing virtual asset services in or from Kenya need to consider the licensing requirements, which include local presence. Foreign platforms targeting Kenyan users should take advice on their position.
How W.O.A. Advocates can help
We advise exchanges, wallet providers, token issuers, fintechs and investors on licensing, AML compliance, tax and disputes. Talk to our fintech team, and read our related article on blockchain in Kenyan banking.