OVERVIEW OF THE VIRTUAL ASSET SERVICE PROVIDERS ACT, 2025: KENYA
The Virtual Asset Service Providers Act, 2025 came into force on 15th October, 2025 after it was assented to by the President on the same date. This new Act provides a legislative framework to license and regulate the activities of Virtual Asset Service Providers in and from Kenya and applies to Virtual Asset Service Providers offering virtual asset services in Kenya. Below is an overview of this new Act:
Objects and purpose of the Act
The objects and purpose of the Act is to:
- provide a legislative framework to license and regulate the activities of Virtual Asset Service Providers in and from Kenya.
Virtual Asset Services
The Act defines Virtual asset services to include:
| Type of service | Function | Description | Regulator |
| Virtual Asset Wallet Provider | Custodial wallet/ Services (corporate and retail) | Services provided by a third party, in which the private keys to the subject’s virtual assets are held and managed by the third party for proof of ownership and facilitation of trading. | Central Bank of Kenya |
| Virtual Asset Exchange | Transfer and conversion of virtual assets | Providing a digital online platform facilitating virtual asset transfers and exchanges. Exchanges may occur between one or more forms of virtual assets, or between virtual assets and fiat currency. | Capital Market Authority |
| Trading, Clearing and Settlement Platforms. | A platform providing for the facilitation of the sale, trading or exchange of virtual assets for fiat currencies or for other virtual assets. | Capital Market Authority | |
| Virtual Asset Payment Processor | Payment gateway | Arranging transactions involving virtual assets and fiat currency, or between virtual assets. | Central Bank of Kenya |
| Virtual Asset Broker | Brokerage services | Facilitate the exchange between one or more forms of virtual assets through a virtual asset exchange and virtual asset wallet providers for and on behalf of clients, which may include retail, institutional investors, or funds. | Capital Market Authority |
| Virtual Assets investment advisor | Investment advisory services | Provision of investment advice on virtual asset, initial virtual asset offering and non-fungible tokens for and on behalf of clients, which may include individuals or institutional investors. | Capital Market Authority |
| Virtual Asset Manager | Virtual Asset management | Managing portfolios in accordance with mandates given by clients on a discretionary basis where such portfolios include one or more virtual assets. | Capital Market Authority |
| Virtual Asset Offering Provider | Initial Coin offering | Issuing and selling virtual assets to the public. May involve participating in and providing financial services relating to the initial Coin offering. | Capital Market Authority |
| Virtual Assets Tokenization | The process of converting real-world assets (like real estate, art or commodities) into digital tokens on blockchain. | Capital Market Authority | |
| Token Issuance Platform | Provision of tokenization platform for issuance and secondary trading of tokens of real-world assets. | Capital Market Authority | |
| Stable coin issuance | The process of creating and managing approved stablecoins | Central Bank of Kenya |
Virtual Assets Services Regulators
The Act, bestows upon the Central Bank of Kenya and the Capital Market Authority the regulatory role of virtual assets services in Kenya.
Functions of the Regulators
- To license virtual assets service providers.
- To regulate, supervise and monitor promoters of virtual asset offering.
- To issue direction, directives and such other enforcement actions for non-compliance.
- To issue and publish notices, guidelines and guidance notes regarding implementation of the act.
- To provide feedback to virtual asset service providers to assist them in detecting and reporting suspicious activities, preventing tipping off and application of anti-money laundering and counter terrorism finance measures.
- To ensure financial soundness and stability of the financial system. and
- To advise the cabinet secretary on matters relating to virtual asset services among other functions.
Virtual Assets Services Provider
The Act provides that a Virtual Asset service provider must either be a local company registered and incorporated under the companies Act No. 17 of 2015 or be a foreign Company registered and issued with a Certificate of compliance under the companies Act No. 17 of 2015 laws of Kenya.
Prohibition
The Act provides that a person shall not carry on, or purport to carry on, the business of virtual asset services, or hold itself out as carrying on that business, in or from Kenya, unless the person is licensed to do so by the relevant regulatory authority.
For the avoidance of doubt, a natural person shall not carry on, or purport to carry on, in or from within Kenya, the business of virtual asset services.
Requirements for licensing
The Act provides that for a person to be licensed to offer virtual asset services in Kenya, the person:
- Must submit an application to be licensed to the relevant regulator accompanied with the prescribed fee.
- Be an eligible person under the Act. That is a registered local company or a registered foreign company.
- Personnel must have skills, knowledge and experience in virtual assets services.
- Must demonstrate ability to comply with Data Protection and Consumer protection requirements.
- Must be capable of complying with financial obligation including insurance, capital or solvency requirement.
- Must satisfy that the directors and senior staff meet the fit and proper test requirement
- Must meet the security measures prescribed under the Computer Misuse and Cybercrime Act.
- Must have physical premises/office in Kenya.
Application for a license
The Act provides that an application for a license shall be made in the prescribed form and shall be accompanied by:
- the application fee; and
- sufficient information as shall be required by the Regulator under any set regulations.
Note: The Authority may refuse to grant or renew a licence if it is satisfied that the information contained in the application is false or untrue in any material particulars or the application does not meet any of the requirements for the issuance or renewal of a licence.
Revocation/Suspension of Licence
The Authority may revoke a licence issued by it where the holder is in breach of any of the provisions of the Act.
The Authority may suspend a Licence if the holder contravenes the provisions of the Act upon giving notice and giving the licensee an opportunity to be heard.
Duration of a licence
Any license issued under the Act shall be valid up to 31st December of the year it is issued.
Transfer or Assignment of a license
Directorship requirement
The Act provides that the affairs and business of a licensee must be managed by a Board of Directors which must comprise of at least 3 natural persons.
Capital/Solvency/insurance
On Insurance, Capital or Solvency, the Act provides that each licensee shall provide proof of adequate capital or insurance cover as may be prescribed by the Regulator.
Conflict of Interest.
The Act further provides that all virtual asset service providers must ensure they have in place policies and procedures to avoid, mitigate and deal with conflict of interest.
Virtual Assets Service Providers obligations:
- Provide services honestly and fairly;
- Maintain and hold prescribed capital;
- Manage actual and potential conflict of interest;
- Have adequate technology, finance and huma resource fo discharge the service;
- Comply with anti-money laundering and counter terrorism financing prevention measures;
- Have its financial statement audited;
- Ensure safekeeping of virtual assets of customers;
- Open and operate bank account in Kenya.
- Record, store, process, transmit customer data in accordance with Kenyan laws.
- Ensure fair and accurate marketing, promotional and advertisement information.
- Plan for disaster management and recovery;
- Have a mechanism for handling customer complaints;
- Have mechanism for protecting whistleblowers;
- Ensure consumer education on virtual assets;
- Take steps to prevent market abuse;
- Ensure appropriate due diligence on virtual assets and their issuers.
Licensee Chief Executive Officer
- The Act provides that every licensee must appoint a CEO who shall be responsible for the day-to-day management of the VASP and act as contact person between the licensee and the Regulator and be responsible for notifying the Regulator of any material change in the licensee.
- Below matters are considered material change under the Act:
- Change in business activities;
- Change in most recent business plan;
- Any merger or acquisition with another legal person;
- Sale of subsidiary;
- Acquisition of controlling interst in another company or entity;
- Outsourcing of virtual asset services from a 3rd Party;
- Change in registered agent for foreign companies;
- Change in principal place of business;
- Change in directorship or senior officers;
- Change in business or trade name;
- Change in domain name; or
- Change in target market.
Restriction on transfer of shares
The Act prohibits transfer of shares and provides that NO shares in a licensee shall be issued or voluntary transferred or disposed of without prior written approval of the Regulator.
Requirement to have cyber security measures
The Act requires every licensee to have appropriate and effective cybersecurity measures in accordance with the provisions of the Computer Misuse and Cybercrimes Act.
Financial reporting by a licensee
A licensee shall at the end of each financial year submit audited financial reports to the Regulator. This is to be done within 3 months from the end of the financial year.
NOTE:
No director, officer, employer, agent or any other person in a virtual asset service provider shall violate or fail to comply with the regulations, guidelines, directions, rules or instructions issued for Anti-money Laundering and Counter Terrorism Finance. A person who contravenes above prohibition commits an offence and is liable on conviction to a fine not exceeding Ksh. 10,000,000/- or imprisonment for a term not exceeding 5 years or both. If a company to a fine not exceeding Ksh.25,000,000/-.
The relevant regulatory authority may take enforcement action against any person who violates any provision of the Act.
A person who is aggrieved by any of the following decisions of the relevant regulatory authority may appeal against that decision to the relevant body (Court of Law, Tribunal or Committee established by written law):
- A refusal to approve an application for a license;
- A refusal to approve any other application or appointment made;
- A decision to amend, revoke or suspend a license;
- A decision to amend a condition of a license; and
- An enforcement action taken by Regulator.
On the commencement of the Act, any person providing virtual asset services shall within 1 year make an application to be issued with a licence under the Act.
At A.O. Wanga Advocates we are happy to assist you in advisory and compliance with the Virtual Asset Service Providers Act, 2025 and the Regulations thereunder.
Feel free to contact us on info@aowangaadvocates.com or +254794600191
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