Kenya’s plan to require stablecoin issuers to keep 30 per cent of their reserves in local banks is drawing questions from Members of Parliament who worry the rule could make it harder for issuers to operate while offering limited additional protection for users.
- Kenya’s plan to require stablecoin issuers to keep 30 per cent of their reserves in local banks is drawing questions...
- The proposal, included in the country’s draft Virtual Asset Service Providers (VASP) Regulations, would require stablecoin issuers to keep at...
- Regulators worldwide have increasingly focused on reserve requirements following the collapse of several crypto projects that exposed weaknesses in how...
- The discussion is just exactly like a debate taking place in other markets where governments are developing stablecoin frameworks.
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The proposal, included in the country’s draft Virtual Asset Service Providers (VASP) Regulations, would require stablecoin issuers to keep at least 30 per cent of reserve assets backing their tokens in segregated accounts at Kenyan commercial banks. The remaining reserves could be held in cash, short-term government securities, or other highly liquid assets.
As MPs review the framework, the debate is centred on how much regulation is enough to protect consumers without making it harder for digital asset businesses to operate, as The Kenyan Wallstreet reported.
Why the 30% reserve rule matters
Stablecoins are designed to maintain a fixed value, usually by holding reserve assets that match the value of tokens in circulation. Regulators worldwide have increasingly focused on reserve requirements following the collapse of several crypto projects that exposed weaknesses in how digital assets were backed.
Kenya’s proposed rules seek to ensure that stablecoin holders can redeem their tokens whenever they choose. By requiring part of the reserves to remain within the country’s banking system, regulators hope to improve oversight and make reserve assets easier to monitor.
But some MPs have raised concerns that the requirement could create unnecessary difficulties for issuers, especially those operating across multiple markets. They argue that forcing firms to maintain a fixed share of reserves locally may increase operational costs and limit flexibility in reserve management.
The discussion is just exactly like a debate taking place in other markets where governments are developing stablecoin frameworks.
In the European Union, stablecoin issuers are required to hold portions of reserves with regulated financial institutions under the Markets in Crypto-Assets (MiCA) regulation. The United States and the United Kingdom have also proposed or introduced rules to strengthen reserve management and redemption guarantees.
The reason for the stablecoin regulation proposal is that local reserve requirements could reduce dependence on offshore custodians and make it easier for regulators to intervene if problems emerge. They argue that keeping part of the reserves in Kenyan banks could strengthen consumer confidence as digital assets become more widely used.
Why Kenya wants local stablecoin reserves
The proposal comes as African policymakers increasingly explore how to regulate digital assets without stifling innovation.
Stablecoins have gained popularity across the continent for cross-border payments, remittances, and access to the dollar. For many users, they offer a faster and often cheaper alternative to traditional financial rails.
The participants warn that overly rigid reserve requirements could make Kenya less attractive to stablecoin issuers seeking to serve regional markets. While there is also an argument that stronger safeguards are necessary if stablecoins are to become a trusted part of the financial system.
For now, MPs continue to scrutinise the proposal as public consultations on the regulations move forward, with the final framework expected to shape how stablecoin issuers operate in one of Africa’s most active digital asset markets.