The Virtual Asset Service Providers (VASP) Bill, 2025, which proposes steep fines of $77,303 (Sh10 million), has prompted Kenyan cryptocurrency market players to urge the country’s parliament to reconsider the proposal. They believe the penalty is overly stringent and could hinder innovation.
Stakeholders are fiercely debating the bill, which aims to regulate the nation’s cryptocurrency market. They see both opportunities and difficulties in formalising oversight over digital currencies.
What the VASP bill aims to achieve
To create a regulatory framework for virtual asset service providers and issuers of initial virtual asset offerings in Kenya, the Leader of Majority, Kimani Ichung’wah, introduced the VASP Bill, 2025.
This measure, which requires all virtual asset service providers to open and run bank accounts in Kenya, aims to increase transparency and prevent illegal activities like money laundering and financing terrorism.
Taxing cryptocurrency transactions, encouraging innovation, and regulating activities like cryptocurrency mining and token distribution—referred to as “adroip” in the decentralised digital ecosystem—were also included in the bill.
If approved, this bill would represent a major step for Kenya in tackling the unregulated cryptocurrency trade that has attracted millions of Kenyans, making it the third African country with comprehensive cryptocurrency legislation, alongside South Africa and Nigeria.
Criticism against the VASP bill
The Virtual Asset Chamber (VAC) and cryptocurrency exchange Yellow Card have criticised the bill’s punitive provisions in their submissions to the Finance and National Planning Committee of the National Assembly.
In contrast to the penalties imposed on other financial institutions, they contend that fines of up to Sh10 million per infraction, along with possible prison terms of up to five years, are excessive.
A VAC representative told the committee, “The penalties are excessively high and could deter investment and innovation in the sector.” The representative emphasised that such measures could discourage new entrants or drive cryptocurrency businesses away from Kenya.
The VASP Bill’s provision requiring regulatory approval for chief executive officers’ appointments was also criticised by Alan Kakai, the association’s director for legal and policy affairs, who claimed that it places excessive administrative burdens on the process.
As many cryptocurrency companies have pre-appointed leadership and operate across multiple jurisdictions, Kakai told the committee, “Companies should retain autonomy to appoint their CEOs, subject to existing fit-and-proper criteria.”
The committee, led by David Mboni of Kitui Rural, resolved to remove this clause, indicating that it was receptive to some of the industry’s concerns.
Vast usage of cryptocurrencies in Kenya amid lack of regulation
Kenya has a substantial cryptocurrency market; according to a 2022 United Nations Conference on Trade and Development (UNCTAD) report, 8.5 percent of the country’s 4.25 million citizens own digital currencies, putting it ahead of even developed nations like the US.
Risks of hyperinflation in local currencies, widespread internet use, and a young population keen to investigate digital financial opportunities have all contributed to the sector’s expansion.
Despite this, the lack of regulation has made investors susceptible to fraud. Notable examples of this include the Velox 10 Global pyramid scheme, which cost investors millions, and the Bitstream Circle scam, which defrauded Kenyans of Sh1.18 billion in just 97 days.
Because of their inherent risks and lack of legal tender status, the Central Bank of Kenya (CBK) has long issued a warning against cryptocurrencies.
The CBK issued a warning in 2015 that digital currencies, such as Bitcoin, are unregulated and not backed by any government. This position has made it more difficult for the sector to integrate with conventional banking systems.
For example, the Blockchain Association of Kenya pointed out that a 2019 CBK circular prohibited banks from running accounts for cryptocurrency companies, making tax remittance difficult.
The association pointed out that these limitations have prevented the industry from sending billions of shillings to the Kenya Revenue Authority (KRA) even though a 3 percent digital asset tax (DAT) has been collected since September 2023.
The drive for regulation coincides with rising worries about money laundering and fraud involving cryptocurrencies in Africa.
The Institute for Security Studies’ 2021 report emphasised the continent’s susceptibility to cryptocurrency frauds, mentioning Africrypt, whose founders stole $3.6 billion, and South Africa’s Mirror Trading International Ponzi scheme, which defrauded investors of $588 million.
The dangers of unregulated markets are highlighted in Kenya by incidents such as the 2023 seizure of $768,959 from a university student connected to a Belgian cryptocurrency dealer.
The VASP Bill’s proponents contend that regulation is necessary to safeguard consumers and validate the sector. “Cryptocurrencies are already being traded by millions of Kenyans, yet there is no law to govern them,” Ichung’wah stated.
Purpose of the bill’s taxation provisions
The purpose of the bill’s taxation provisions is to collect money from the estimated Sh3 trillion in cryptocurrency transactions that took place in Kenya between July 2021 and June 2022. This is a crucial step in increasing government revenue.
But cryptocurrency companies caution that strict laws like the VASP Bill may drive the sector underground or to countries with laxer regulations.
The delicate balance between innovation and regulation is brought to light by the VASP Bill debate. While the government works to prevent financial crimes and safeguard consumers, the cryptocurrency industry is pushing for a system that promotes expansion without enforcing harsh penalties.