Kenya has officially entered a new era in digital finance with the enactment of the Virtual Assets Service Providers (VASP) Act, 2025. The law ushers virtual assets out of the shadows of regulatory uncertainty into a structured, formal regime signaling that the age of unregulated innovation in this space is over.
The Act establishes a comprehensive licensing framework for entities offering virtual asset services in or from Kenya. It defines these services broadly, encompassing issuance, exchange, custody, tokenization and conversion and subjects them to stringent obligations on anti–money laundering, counter–terrorism financing, governance, cybersecurity and audit. Breaches attract serious penalties, including license revocation and potential criminal liability.
At its core, the Act legitimizes the digital asset ecosystem. It integrates virtual assets into Kenya’s regulated financial system, unlocking new opportunities for collaboration with banks, institutional investors and payment providers that previously hesitated due to regulatory opacity. Compliance now becomes more than a legal requirement, it becomes a trust currency for credible operators.
That said, the transition will not be simple. The law grants discretion to regulators, notably the Central Bank of Kenya and the Capital Markets Authority, whose overlapping mandates could either foster cooperation or create jurisdictional friction.
For businesses and investors, the message is clear, this is not the time to observe, it is the time to act;
- Assess your operations against the new definitions to determine whether licensing is required.
- Re-examine your corporate structure to ensure compliance with local presence and control requirements.
- Engage regulators early to clarify expectations and classifications.
- Build robust compliance frameworks covering AML/CFT, governance and cybersecurity.
- Redraft contracts to reflect new compliance covenants, audit rights and termination triggers.
This law will reshape how virtual assets are issued, traded and governed. Those who adapt early through treating compliance as strategic infrastructure rather than a regulatory burden will capture first-mover advantage, institutional and investor trust.
At JMK Partners Advocates LLp, we view the VASP Act as more than a legal milestone, it is a structural shift in how digital finance will be built, governed and scaled in Kenya. We help clients navigate this new terrain by translating regulatory obligations into operational strategies that protect value and enable growth.
Incase of inquiries, reach out to us via info@jmkadvocates.co.ke.
Leave a Comment