Kenya moves closer to crypto regulation as MPs back joint oversight of digital asset sector

A parliamentary committee has supported a proposal to establish a joint regulatory team to oversee the operations of digital asset service providers in Kenya, setting the stage for broader oversight of the growing cryptocurrency and digital asset sector.

The National Assembly’s Finance Committee has recommended that five government agencies jointly supervise virtual asset service providers (VASPs), marking a major step toward formal regulation of the industry.

The agencies proposed to be part of the multi-agency framework include the Central Bank of Kenya, Capital Markets Authority, Competition Authority of Kenya, Communications Authority of Kenya, and the Office of the Data Protection Commissioner.

“The committee agreed with the proposal by the stakeholder (Credence Africa),” reads the committee’s report, which followed public consultations on the Virtual Asset Service Providers Bill, 2025.

The team could also include any other institution appointed by the Cabinet Secretary through a gazette notice.

This joint unit is expected to monitor various aspects of the digital asset ecosystem, including consumer protection, market conduct, data security, and digital infrastructure.

The model was presented to the committee by Credence Africa, a social enterprise that participated in the public hearings on the proposed law.

Digital assets include items of value that exist in electronic form, such as cryptocurrencies, tokens, and other cryptographically generated digital representations used in value exchange.

These assets are not physical but are increasingly being adopted as alternative financial tools globally.

The committee has also accepted a suggestion by the Virtual Assets Chamber (VAC) to remove a clause from the Bill that would have given the regulatory authority the power to carry out off-site surveillance.

According to the VAC, the provision was vague and lacked clear boundaries, raising concerns about possible overreach.

The Virtual Asset Service Providers Bill was introduced to Parliament on April 4, 2025, and has received strong backing from players in the crypto space.

For years, these firms have faced challenges accessing banking services due to an advisory issued by the Central Bank, which cautioned financial institutions against dealing with crypto-related businesses.

Former Central Bank Governor Patrick Njoroge had earlier warned that digital currencies could threaten financial stability, but also acknowledged their potential to improve financial inclusion and reduce transaction costs.

The proposed law will require all virtual asset service providers to open and maintain a bank account within Kenya. This move is expected to help address transparency and accountability concerns in the sector.

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If enacted, Kenya will join Nigeria and South Africa as one of the few African countries with a legal framework for regulating cryptocurrencies and related digital assets.

A 2022 report by the United Nations found that Kenya led the continent in digital asset adoption, with about 8.5 per cent of the population, equivalent to around 4.25 million people, owning cryptocurrencies.

The country ranked ahead of several advanced economies, including the United States, which had 8.3 per cent of its population holding digital currencies.