rewrite this title Industry Groups Warn New Crypto Rules Could Drive Kenyan Startups Offshore

Strict Licensing and Oversight Requirements

Kenya’s cryptocurrency industry is reportedly raising concerns over draft regulations that would require firms to hold significant amounts of paid-up capital before obtaining operating licenses. Industry representatives say the proposed thresholds could push smaller startups out of the market and concentrate activity among a handful of well-funded players.

The draft Virtual Asset Service Providers (VASP) Regulations 2026, prepared by the National Treasury, outlines licensing requirements for exchanges, wallet providers, and stablecoin issuers. Under the proposal, stablecoin firms would need up to $3.86 million (500 million Kenyan shillings) in paid-up capital, while other service providers face lower but still substantial requirements. The rules also mandate that firms ring-fence client funds and submit to oversight by the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA).

The Virtual Asset Association of Kenya (VAAK), which represents about 50 firms, warned that the capital demands, combined with insurance and compliance costs, risk excluding startups from the formal market. According to the association, this could drive users toward offshore or unregulated platforms, undermining the consumer protection goals regulators seek to achieve.

Balancing Innovation and Investor Protection

In October 2025, Kenyan lawmakers passed the VASP bill, which President William Ruto signed into law later that month. While the VASP Act is legally in force, it serves as a parent law, meaning the National Treasury must develop specific rules before the government can begin licensing firms.

On March 17, 2026, the National Treasury unveiled the Draft Virtual Asset Service Providers Regulations, 2026. Stakeholders and the public have until April 10, 2026, to submit feedback.

Kenyan authorities argue that the regulations are necessary to safeguard investors and bring order to a sector that has grown rapidly but remains largely unregulated. Kenya is among Africa’s leaders in fintech adoption, and policymakers say tighter rules are needed to prevent fraud and financial instability.

Once the public consultation period ends, the Treasury and the Multi-Agency Task Force will finalize the regulations. Only after these are formally published in the Kenya Gazette will the CBK and the CMA begin accepting license applications.

FAQ ❓

What are Kenya’s draft VASP regulations? They are proposed rules requiring crypto firms to hold large paid‑up capital before licensing. Why is the industry concerned? Startups fear the high capital thresholds will push them out and favor big players. What do regulators aim to achieve? Authorities say the rules will protect investors and stabilize Kenya’s fast‑growing crypto sector. What happens next? Public feedback runs until April 10, 2026, after which final rules will be gazetted and licenses issued.