Crackdown on crypto begins as firms face Sh25m fine, imprisonment

Cryptocurrency wallet. [File Courtesy]

Kenya’s cryptocurrency crackdown began in earnest on Friday after the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) declared the Virtual Asset Service Providers (VASP) Act fully operational.

The move leaves every unlicensed crypto operator in the country exposed to fines of up to Sh25 million and potential imprisonment.

The operationalisation has left millions of Kenyans who use digital assets to send money, pay for goods, or hedge against inflation with the risk of frozen withdrawals and the loss of access to platforms they have relied on for years.

The joint public notice, dated November 13, came nine days after the transitional grace period expired on November 4, sparking a frantic rush among major exchanges to file licence applications and avoid enforcement action, The Standard has learned.

The notice states that “any person(s) providing or intending to provide virtual asset services are required to apply for a licence from the relevant regulatory authority pursuant to the Act.” It also confirms that “the list of licensed VASPs will be published by the respective regulatory authorities.”

As of November 13, no such list had been published by either regulator, leaving the market in a state of regulatory limbo.

The legislative timeline was tight. The VASP Act was gazetted on October 21, 2025, and commenced on November 4, 2025.

The final VASP Regulations were published as Legal Notice 134 on July 22 this year, leaving existing operators just 105 days to prepare for the end of the transition period.

Section 47 of the Act gave existing providers one year to comply, a window that expired on November 4, 2026.

The rules require regulators to determine complete applications within 30 days, but the clock only starts after due diligence is finished.

This means applications filed close to the deadline had no guarantee of a decision before the transition ended.

The licensing regime is split between two regulators. The CBK supervises stablecoin issuers, wallet providers, and payment processors. The CMA regulates exchanges, brokers, tokenisation platforms, and investment advisors.

The capital requirements are steep. Stablecoin issuers face the highest bar at Sh300 million in paid-up capital, a figure cut from Sh500 million in the draft regulations.

Exchanges require Sh100 million, wallet providers Sh150 million, payment processors and brokers Sh10 million, and tokenisation providers Sh10 million.

Firms offering multiple services must meet each category’s threshold separately.

The rules also apply extraterritorially to any platform that solicits Kenyan consumers or derives economic benefit from the market, regardless of physical presence.

Only companies limited by shares incorporated under Kenyan law can be licensed, according to legal analyses of the framework.

Major players have publicly committed to the process. Binance, the world’s largest crypto exchange by volume, previously confirmed it will apply for a Kenyan licence after participating in the public consultation.

But the absence of a published licence register has created anxiety.

 Industry insiders warn that smaller operators may be pushed offshore or out of the market entirely, unable to absorb the compliance costs and capital thresholds.

The crackdown is partly driven by Kenya’s commitment to exit the Financial Action Task Force (FATF) grey list, where it has remained since February 2024 due to deficiencies including inadequate regulation of virtual asset risks. The VASP Act is a centrepiece of Kenya’s legislative response.

For ordinary crypto users, the immediate risk is service disruption, stakeholders say.

If regulators begin enforcement action against unlicensed platforms, users could face sudden withdrawal freezes or service suspensions.

The CBK and CMA have directed firms to detailed licensing checklists on their websites and provided official email channels for applications.

Users are being urged to monitor the regulators' websites for the eventual publication of the licensed VASP list.

For regulators, the challenge is dual, analysts say. This includes processing a backlog of applications while demonstrating to the FATF that Kenya is enforcing its new rules.

It remains unclear whether the regulators will grant provisional exemptions to major firms while their applications are processed, a move that would prevent a sudden disruption to the market.

The 30-day decision clock and the sheer scale of the market mean the coming weeks will test whether Kenya’s bet on regulation over prohibition can deliver both compliance and continuity, analysts said.