Kenya has started a new era of digital finance after the passing of the Virtual Asset Service Providers (VASP) Bill. It is the country’s first comprehensive cryptocurrency regulation. The bill, which is awaiting President William Ruto’s signature, has been called a transformative move that could potentially unlock billions in investment and position Kenya as one of the leading crypto hubs on the African continent.
The legislation creates a clear framework for the regulation of digital assets, including cryptocurrencies, stablecoins, and exchanges. It gives the Central Bank of Kenya the authority to license and supervise stablecoins and other digital assets. The Capital Markets Authority (CMA) will be responsible for crypto exchanges and trading platforms. This double oversight model is similar to the approaches of other major economies, like the US and the UK. It balances investor protection and the freedom for innovation.
Supporters of the VASP bill believe that Kenya will become a gateway for cryptocurrency activities in Africa. Chair of the National Assembly’s Finance Committee, Kuria Kimani, stated that the legislation is designed “to balance safety and innovation” and ensure that investors and businesses have confidence operating in the digital asset market.
The passing of the bill comes at a time when many regions of the world are experiencing unregulated crypto activity. Kenya’s recent clarity on the matter is expected to attract big international names like Coinbase and Binance, who have been expanding into emerging markets where user adoption is high but oversight is less so.
The bill also strengthens the country’s existing digital finance systems, including the M-Pesa mobile payment system, which increased access to money in East Africa.
As digital currencies continue to gain legitimacy, new opportunities are emerging online, specifically in online entertainment and gaming. For example, industries like online casinos and skill-based games are exploring blockchain technology for transparency and faster payouts. An increasing number of platforms now use cryptocurrency to power various games, including fish table games. This digital version of an arcade-style shooting game has players competing for cash prizes. Understanding how fish game gambling works gives a glimpse into how regulated crypto transactions can improve user experience by offering faster, more secure, and more transparent payments.
Kenya has existing legislation for betting and gambling, making it one of the most liberal African countries in that regard. Online betting has been legal since the early 2000s, and the country has developed a solid gambling culture among the younger population. The combination of crypto and gambling presents a lucrative development for regulators, especially since the government will benefit from tax revenue.
By introducing the VASP bill, lawmakers are addressing concerns raised by the International Monetary Fund (IMF). The Fund has urged African countries to implement controls to manage risks like money laundering and terrorism financing. Kenya’s new law shows a commitment to aligning with international standards.
The impact of the legislation will be felt beyond crypto investments. Kenya ranks among the top four African nations for crypto adoption, behind Nigeria, Ethiopia, and Morocco. The country introduced a 3% tax on digital asset transactions in 2023. Stable coins account for almost half of Sub-Saharan Africa’s crypto transactions, showing the preference for dollar-backed tokens to hedge against the volatility of fiat currencies.
It is likely that Kenya’s VASP bill will have a domino effect across the rest of Africa. Industry observers believe that neighboring Uganda and Tanzania will likely develop their own formal crypto policies soon. This will facilitate cross-border transactions and encourage innovation in fintech. Kenya has a young, connected population and a history of technological ingenuity, and the country may soon rival South Africa as the continental leader in blockchain regulation.
In the next few months, the world will be watching to see how effectively the new law is implemented. Collaboration between the CBK, CMA, Communications Authority, Competition Authority, and Data Protection Office will likely result in a coordinated oversight approach.
