Over a Third of Kenyan Financial Institutions Embrace Cryptocurrency - Central Bank Report
In a significant stride towards formalising the virtual asset sector, Kenya's Virtual Asset Service Providers (VASP) Bill, 2025, is making its way through the legislative process. The National Assembly Finance and Planning Committee has tabled its report, and the Bill has passed a Second Reading, awaiting further committee review [1][4].
The Bill aims to establish a comprehensive regulatory framework for virtual assets, such as cryptocurrencies, Non-Fungible Tokens (NFTs), and stablecoins, and their service providers in Kenya, bringing the country one step closer to the formal regulation of this sector [1][2][3].
Key components of the Bill include broadening eligibility for VASPs to include Limited Liability Partnerships (LLPs), requiring VASPs to open and operate bank accounts in Kenya, establishing a joint Virtual Assets Regulatory Authority (VARA), and implementing licensing mechanisms specific to VASPs and initial virtual asset offerings [1][2].
The proposed VARA will consolidate oversight, involving representatives from the National Treasury, Central Bank of Kenya, Capital Markets Authority, and other experts [3][4]. Penalties for non-compliance have been under debate, with recent moves to reduce fines to strike a balance between enforcement and support for the emerging crypto ecosystem [2].
This regulatory clarity is expected to boost the readiness of traditional banks, including commercial and microfinance banks, to explore virtual asset services. The clear legal framework and licensing regime will reduce uncertainty and operational risks associated with virtual asset dealings [1][3].
The requirement for VASPs to maintain bank accounts domestically means banks will become integral partners in virtual asset ecosystems, necessitating upgrades in compliance, risk management, and technology infrastructure to handle digital assets securely [1]. The involvement of national financial regulators and a unified authority could promote smoother cross-sector collaboration and reduce regulatory fragmentation [3][4].
However, banks will need to invest in staff training, internal controls, and compliance frameworks tailored to virtual assets [1]. Given the Bill's emphasis on consumer protection and conflict of interest management, this investment is necessary to ensure a secure and fair virtual asset environment.
The advancement of the Bill signals Kenya's move towards a modern, risk-based crypto regulatory framework that balances innovation with oversight. This environment should encourage commercial and microfinance banks to be more confident and prepared to explore virtual asset opportunities in Kenya's growing digital economy [3].
The Central Bank of Kenya (CBK) conducted a survey revealing that 31% of commercial and microfinance banks are "highly likely" to engage in activities involving virtual assets [2][4]. The survey results indicate that some banks in Kenya are open to investing in virtual assets such as cryptocurrencies and NFTs.
However, risks associated with virtual assets, such as money laundering, terrorism financing, fraud, cybersecurity, and the volatile nature of crypto markets, have been flagged by many banks [1]. The absence of precise regulation in the crypto sector poses risks in Kenya.
Kenya is one of the leading African countries for cryptocurrency adoption and usage. The government's active efforts to formalise the crypto sector, as evidenced by the proposed VASP Bill, could further bolster this position.
In conclusion, the VASP Bill's progress signifies a significant step towards improving the regulatory environment and operational clarity for virtual assets in Kenya. Once enacted, it is expected to positively influence the readiness of Kenyan banks to engage with virtual assets, contributing to the growth of Kenya's digital economy.
References: [1] Coindesk. (2025). Kenya's Virtual Asset Service Providers Bill Moves Forward in Parliament. [online] Available at: https://www.coindesk.com/kenyas-virtual-asset-service-providers-bill-moves-forward-in-parliament
[2] The Star. (2025). Kenya's Virtual Asset Service Providers Bill: A Step Towards Crypto Regulation. [online] Available at: https://www.the-star.co.ke/business/2025/kenyas-virtual-asset-service-providers-bill-a-step-towards-crypto-regulation/
[3] Business Daily Africa. (2025). Kenya's Virtual Asset Service Providers Bill: A Boost for Banks and the Crypto Sector. [online] Available at: https://www.businessdailyafrica.com/analysis/kenyas-virtual-asset-service-providers-bill-a-boost-for-banks-and-the-crypto-sector/
[4] Central Bank of Kenya. (2024). 2024 Innovation Survey. [online] Available at: https://www.centralbank.go.ke/research-and-publications/2024-innovation-survey/
- The VASP Bill, passing a Second Reading in Kenya's National Assembly, aims to establish a comprehensive regulatory framework for cryptocurrencies, Non-Fungible Tokens (NFTs), and stablecoins, including the involvement of Limited Liability Partnerships (LLPs).
- The proposed Virtual Assets Regulatory Authority (VARA) will be a joint body involving representatives from the National Treasury, Central Bank of Kenya, Capital Markets Authority, and other experts, overseeing the virtual asset sector.
- The Bill requires Virtual Asset Service Providers (VASPs) to open and operate bank accounts locally, making banks integral partners in virtual asset ecosystems, necessitating upgrades in compliance, risk management, and technology infrastructure.
- With the potential for virtual assets to contribute to Kenya's digital economy, the Central Bank of Kenya conducted a survey revealing that 31% of commercial and microfinance banks are "highly likely" to engage in virtual asset activities, including cryptocurrencies and NFTs.
- A clear legal framework, such as the VASP Bill, will reduce uncertainty and operational risks associated with virtual asset dealings, encouraging banks to explore virtual asset services.
- However, risks such as money laundering, terrorism financing, fraud, cybersecurity, and the volatile nature of crypto markets need to be addressed through staff training, internal controls, and compliance frameworks tailored to virtual assets.
