Cryptocurrency Regulations in Kenya

Kenya has changed considerably from early skepticism about cryptocurrency to one of cautious engagement in the past decade. At the moment, Kenya is crypto-permissive but not fully, so it is nowhere close to prohibitive. Formal crypto regulations are being drafted by the government and the first framework for the legality of digital assets and related services will be upon the masses. Owning and trading crypto as well as crypto businesses is not illegal as long as all the rules are followed. However, cryptocurrency is not recognized as legal tender.

It is essential to gain an understanding of Kenya’s crypto regulatory landscape for investors, startups and users. Influence taxes, licensing, protection against fraud, crypto usage limits and much more. If crypto is what you are holding, launching a blockchain startup, or even sending remittances, it is always important to have the law so you are protected and compliant.

All have distinct roles in crypto policy and are the main regulatory bodies in Kenya, such as the Central Bank of Kenya (CBK), the Capital Markets Authority (CMA), the Kenya Revenue Authority (KRA) and the National Treasury.

Historical Context 

When Kenya’s regulators met the news of Bitcoin and other cryptocurrencies in the early 2010s, their response was one of skepticism. As such, in 2015, Central Bank of Kenya issued a public warning that the cryptocurrencies were not legal tender and that they did not have regulatory backing. Back then, there couldn’t have been any licensed crypto service providers whatsoever and the user was all at sea.

Despite these warnings, adoption surged. A total of 4 million Kenyans had gotten some crypto by 2022 when around 8.5% of the population also owned crypto. This prompted lawmakers to act. In 2022, there was a private member’s bill to tax crypto and to oblige exchanges to enroll with the CMA.

By late 2024, Kenya had moved on from isolated proposals and was entering the comprehensive framework. For the crypto sector, the government released A National Policy on Virtual Assets and the VASP Bill, 2025 for public consultation for full legalization and regulation.

Regulatory Framework 

Kenya’s regulatory approach for cryptocurrency is multi-agency and is evolving. Capital markets are overseen by the CMA, which may allow token sales and exchanges to be licensed. The CBK regulates the crypto payment services and watches over payments and monetary policy. The KRA focuses on taxation, while the National Treasury spearheads policy development.

Licensing & Registration Requirements:

The Virtual Asset Service Providers (VASP) Bill that has been drafted also requires that all crypto service providers like exchanges, wallet apps and ICOs to register as companies and acquire licenses. For the companies, operating without a license could earn them fines as high as KES 20 million while transgressing persons run a risk of a jail term of up to 10 years and or a fine of not less than KES 10 million.

AML & KYC Requirements:

Crypto companies working as licensed firms have to go through rigorous Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, and report any suspicious activity to the Financial Reporting Centre. This is in keeping with the traditional financial institutions.

Crypto Taxation:

Currently, crypto tax laws are still pending and Kenya will treat crypto as a capital asset that is liable to capital gains tax on profits. Taxable events may occur if the crypto being used for paying is also involved. Once these pieces of legislation pass, KRA is expected to enforce tax compliance.

ICOs & STOs Regulation:

Under the VASP Bill, it requires the registration and approval of Initial Coin Offerings (ICOs) or Security Token Offerings (STOs). Tokens can only be launched by registered companies and promoters may be penalized heavily for misleading investors.

Kenya Crypto Policies 

Crypto is not classified as legal tender in Kenya; thus it does not have to be accepted for payments by businesses. While a lot has been written about using crypto in a regular transaction, most crypto uses still remain in P2P trading, investments, or remittances. While crypto transactions are informal, they largely fall in a gray area. Therefore, under upcoming regulations, crypto payment services will be required to be licensed by the CBK, hence putting a ban on unlicensed platforms.

Mining:

The sale of crypto mining software is an unregulated process. He also added that crypto mining is neither prohibited nor regulated. But mining stays as a niche activity because of power costs, but the government has recognized mining in its draft policies and there could be future regulations which would apply.

Government Initiatives:

While Kenya has not yet launched a Central Bank Digital Currency (CBDC), there was a 2022 discussion paper on the matter. The CBK concluded that by 2023, digital shilling wasn’t an urgent priority given that mobile money services such as M-Pesa had been quite successful.

Penalties for Non-Compliance:

Unlicensed crypto activity and scams are punished with serious consequences in the VASP Bill. Fraud or market manipulation will attract fines of up to KES 30 million or 10 years of imprisonment. The idea is to prevent illegal schemes and protect users from such tricks as pump & dump or fake tokens.

Kenya’s Approach to Crypto Innovation 

Regulatory sandboxes open up room for fintech innovation in Kenya. Blockchain startups get to test their products under regulatory oversight through the CMA’s sandbox. Yeshara Tokens, a platform for property tokenization, is one of the notable entrants, while OwnMali helps digitize real estate ownership.

Flexibility is an advantage to startups while authorities can see risks and develop rules for the future. Additionally, the CBK is open for new payments and blockchain technologies are enabled through government-backed hackathons, as it has been experimented on land registries, identity systems and public services.

Business adoption is growing cautiously. However, with crypto, firms like AZA Finance (previously BitPesa) use crypto to reduce remittance costs while also local banks, specifically Equity Bank, are looking to explore blockchain tech for backend processes and not even for public crypto services.

Notable Challenges and Issues 

Enforcement:

Crypto’s borderless nature complicates enforcement. Foreign platforms are used by many Kenyans way beyond the local jurisdiction. A hurdle is the regulation of these interactions or incentivizing users to switch to licensed services.

Fraud & Public Perception:

The public trust had been harmed by Crypto scams. Financial losses have been incurred through pump-and-dump schemes and pyramid investments. Though the regulation is meant to help curb fraud, there is still little public education and awareness campaigns necessary.

Regulatory Coordination:

Agencies like CBK and CMA seem to possess some overlapping territory, insofar as you think about stablecoins or token classification. Authority must be streamlined by the government so that their businesses aren’t confused.

As such, capacity building, cross-border cooperation, and ongoing stakeholder engagement are required.

Key Regulatory Trends and Future Outlook 

Recent Developments:

In late 2024, Kenya became the clearest signal yet regarding crypto regulation when it released the National Policy on Virtual Assets (VASPs) and VASP Bill, 2025. There have been public consultations and the final legislation will be completed by late 2025.

Future Outlook:

Crypto may be coming to Kenya under the welcome umbrella of licensed exchanges, clear taxation and consumer protection. Crypto will most likely serve more as an investment and as a fintech tool, rather than as a legal tender.

Global Impact:

Kenya is one of Africa’s fintech leaders and the laws involving cryptocurrencies in the country may have an impact on Uganda and Tanzania, among others. In the future, regional policies may harmonize with each other, particularly when Kenya syncs with international AML standards and FATF guidelines.

On the whole, Kenya is going to a balanced approach to crypto innovation, where innovation meets controls.

Conclusion 

One could see the progression from careful warnings to a comprehensive, investor-focused, regulatory framework in Kenya’s journey when it comes to crypto. Thus, the country is laying the groundwork for a mature crypto market with licensing, taxation and AML rules on the horizon.

Investors, customers, and users need to be aware of these rules in order to operate legally. To stay ahead in such an age, you’d best stay informed of what’s going on. Whether Kenya’s future lies as an African crypto hub also depends on how well the stakeholders can adapt to these changes.

Frequently Asked Questions (FAQs)

1. Is Bitcoin legal in Kenya?

Yes. While you cannot legally trade Bitcoin, you can hold and trade it legally, but not as legal tender.

2. Is crypto taxed in Kenya?

Though not yet enacted, VASP Bill suggests that crypto gains will be considered to fall under capital gains tax.

3. Is it possible to use crypto to buy goods and services in Kenya?

Not officially. 79% of the population accepts crypto as a form of payment and peer-to-peer usage is increasing despite the fact that it is not legal tender.

4. Is it legal to mine crypto in Kenya?

Yes. Despite that mining is legal and unregulated, the electricity costs keep it uncommon.

5. What if I run an unlicensed crypto business?

If you run unlicensed crypto business, penalties can take the form of a fine of up to 20–30 million KES and up to 10 years imprisonment.

6. Do I need a license to run a crypto wallet or exchange?

Yes. All service providers—wallets, exchanges, ICOs—must register and receive licenses under the draft VASP law.

7. Are ICOs allowed in Kenya?

Yes, but only with approval. The VASP Bill provides for registration and oversight with a view to protecting investors.

8. Do employees or contractors have the ability to accept crypto as a form of payment?

You can do this on a P2P basis, but officially this is not allowed, so it’s definitely in legal gray area.

9. Has the government given indication about the introduction of CBDC (digital shilling)?

Not anytime soon. It was explored by the CBK in 2022 that shelved plans thanks to the dominant M-Pesa.

10. Must I file crypto holdings to the tax authorities?

Yes, you must file your crypto holdings to the tax authorities, also under the upcoming framework you need to do so with a profit or transacting with crypto. 

11. Are there any local crypto startups that have a relationship with the government?

Yes, there are local startups among us. You can find testing projects in regulatory sandboxes, like Yeshara Tokens and OwnMali.