Kenya Published Its Crypto Regulation Draft: Stablecoin Reserves, Licensing Rules Are All on the Table

Kenya’s National Treasury published draft Virtual Asset Service Providers Regulations on March 18, opening a public consultation period that runs until April 10 and outlining the most comprehensive crypto oversight framework the country has proposed to date.

Why Kenya Is Moving Now

The regulatory push has a specific origin. Kenya was grey-listed by the Financial Action Task Force in 2024, placing it on a watchlist of jurisdictions with insufficient anti-money laundering and counter-terrorism financing controls. The VASP Act of 2025, signed into law in late 2025, was the legislative response. The draft regulations published this week are the operational framework that gives the Act practical effect.

Grey-listing carries real consequences for a country’s banking relationships and correspondent banking access. Kenya’s timeline from grey-listing to draft regulations reflects a government moving with urgency rather than at the pace typical of crypto regulatory development in emerging markets.

What the Draft Actually Proposes

The stablecoin reserve requirements are the most technically specific element of the draft. Issuers must hold at least 30% of customer funds in segregated accounts at commercial banks domiciled in Kenya. The remaining reserves must be held in high-quality liquid assets, defined as cash or government securities with a maturity of 90 days or less. That structure mirrors reserve frameworks being debated in more developed markets and reflects a deliberate effort to keep a portion of stablecoin backing within the domestic banking system.

The licensing framework covers all crypto platforms operating in Kenya, including exchanges, brokers, and wallet providers. Local firms apply for licenses directly. Foreign companies must obtain a compliance certificate rather than a full license, creating a two-tier access structure that gives domestic operators a cleaner regulatory pathway. Physical office presence in Kenya and director background checks are mandatory requirements for all licensed entities.

The fee structure introduces two new charges. Token issuance platforms will pay a 0.05% transaction fee, split between both parties to a transaction. Successful virtual asset offerings will attract a 0.5% levy on the total value raised. Those figures are modest relative to transaction costs in traditional financial markets but represent a new cost layer for the crypto sector that did not exist under the prior tax framework.

The Divided Oversight Model

The draft assigns regulatory responsibility across two institutions. The Central Bank of Kenya will oversee stablecoins and payment-related entities. The Capital Markets Authority will regulate exchanges, brokers, and tokenization platforms. That split reflects the functional distinction between payment instruments and investment vehicles, a division that other jurisdictions including the United States have debated and partially implemented.

Divided oversight creates coordination challenges that single-regulator frameworks avoid. A stablecoin used primarily for payments falls under the CBK. The same stablecoin used as collateral on a tokenization platform could involve the CMA. How the two regulators handle jurisdictional overlap will be a key question during the public consultation period.

What Changes From the Prior Framework

The draft replaces Kenya’s controversial 3% Digital Asset Tax with a structured 10% consumption tax applied to service fees rather than transaction values. That shift changes the tax burden significantly. A percentage of service fees is a narrower base than a percentage of transaction values, which penalized high-frequency and high-volume activity disproportionately. The prior framework drew sustained industry criticism. The new structure is more aligned with how financial services are taxed in other sectors.

The Consultation Timeline

Public comments are open until April 10, 2026. A series of eleven public forums will begin on March 30, spanning Nairobi, Mombasa, Kisumu, and Eldoret among other major towns. The geographic spread of the forums reflects an intention to gather input beyond the capital rather than conducting a Nairobi-centric process.

Whether the draft regulations emerge from consultation materially changed depends on the quality of industry and public engagement over the next three weeks. The FATF grey-listing pressure means Kenya cannot afford an extended delay in finalizing the framework, which limits how much the consultation can realistically alter the core structure.

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