Legislation aimed at governing Virtual Asset Service Providers (VASPs) presented before the Kenyan parliament

Legislation aimed at governing Virtual Asset Service Providers (VASPs) presented before the Kenyan parliament

**Kenya Takes Steps to Regulate Crypto Industry with VASP Bill 2025**

Kenya is set to establish a comprehensive regulatory framework for the rapidly growing crypto industry within its borders, following the introduction of the Virtual Assets Service Providers (VASP) Bill 2025. The bill, currently in the advanced legislative stage, aims to create a secure, innovation-friendly, and risk-based regulatory environment for virtual asset service providers (VASPs) operating in the country.

The VASP Bill 2025 proposes the establishment of a dedicated regulatory authority named the Virtual Assets Regulatory Authority (VARA). This body will be composed of government and regulatory officials, including representatives from the National Treasury, ICT Ministry, Central Bank of Kenya, Capital Markets Authority, Communications Authority, and one private sector member from the Virtual Assets Chamber of Commerce.

Under the proposed legislation, all VASPs must obtain a formal license to ensure they meet minimum capital, operational, and consumer protection standards. This move is intended to prevent unregulated practices that have led to significant losses for Kenyan crypto users, such as the collapse of Bitstream Circle.

The bill is designed to harmonize crypto oversight across agencies, minimizing red tape while prioritizing consumer protection against fraud, scams, cybersecurity threats, and privacy risks. It also requires VASPs to implement anti-money laundering/combating the financing of terrorism (AML/CFT) measures and to collect and share user information with relevant government agencies.

The licensing processes have been tailored to enable startups and fintech innovators, signaling an openness to promote crypto-related financial inclusion and fintech growth akin to Kenya's pioneering mobile money ecosystem (e.g., M-Pesa). The bill also aims to boost the growth of fintech companies, SMEs, and diaspora engagement in crypto payments by creating predictable rules and compliant pathways for virtual asset operations.

However, concerns remain regarding the composition of VARA's board and ensuring adequate representation of industry stakeholders and fair regulatory practices. A Kenyan-based blockchain advocacy group, the Virtual Assets Chamber of Commerce (VACC), submitted policy recommendations to the technical committee on crypto regulations to address these concerns.

The passage of the VASP Bill 2025 could lead to increased oversight and transparency in Kenya's virtual asset market, legitimizing and formalizing the country's crypto ecosystem. It is expected to boost investment, innovation, and growth in the sector, positioning Kenya as a leader in African digital finance.

The Kenyan government began talks with stakeholders in the Kenyan crypto industry towards the establishment of actual crypto regulations following the uproar over the 3% digital asset tax (DAT) introduced in 2023. In December 2024, the Kenyan National Treasury released draft guidelines for VASPs in the country and called for public input on the imminent crypto regulations. The bill's provisions are yet to be passed by the National Assembly, and it does not specify a date for its implementation. The bill does not mention any penalties for non-compliance.

In summary, the VASP Bill 2025 marks a significant milestone toward a regulated, secure, and innovation-friendly crypto environment in Kenya. It balances consumer protections with enabling fintech growth and integrates Kenya’s crypto regulation into global best practice frameworks while addressing local risks and realities.

1. The implementation of the VASP Bill 2025 in Kenya will likely have a ripple effect across Africa, encouraging other African nations to adopt similar regulatory frameworks for the crypto industry.
2. Nigeria, a key player in the African digital finance landscape, is closely monitoring the progress of the VASP Bill 2025 in Kenya, as it could influence future crypto policies in the country.
3. The establishment of the Virtual Assets Regulatory Authority (VARA) in Kenya is noteworthy, as it brings together governmental and private sector entities with expertise in finance, technology, and policy, fostering collaboration and dialogue among key stakeholders.
4. The VASP Bill 2025 represents a significant step forward in the digital assets space, as it integrates best practices in regulation, investor protection, and innovation promotion, setting a positive example for other emerging economies globally.
5. As the VASP Bill 2025 progresses through the legislative process in Kenya, policymakers and regulators would benefit from examining the bill's provisions and considering similar policy proposals to support the growth of the burgeoning crypto industry within their own borders.
6. Businesses in the Kenyan crypto industry are optimistic about the prospects of the VASP Bill 2025, believing that it will foster a more stable and favorable environment for conducting business, thereby encouraging further investment and growth in the sector.

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