Kenya’s proposed framework for virtual asset firms is drawing sharp warnings from the industry, with the Virtual Asset Association of Kenya saying the rules, as written, would push most local operators out of the regulated space entirely.
VAAK, which groups 50 crypto firms operating in the country, says the combination of steep capital floors, mandatory insurance, and recurring licence fees places compliance out of reach for the bulk of current players. According to @moneyacademyKE on X, crypto firms in Kenya are pushing for lower capital requirements and simpler licensing rules, warning that the current rules could slow growth and push startups away.
Capital Floors That Most Cannot Clear
The numbers in Kenya’s draft are not modest. Virtual asset exchanges and wallet providers must hold at least KES 150 million in paid-up capital. Tokenisation firms and digital token issuers face a KES 200 million threshold. Stablecoin issuers carry the heaviest load at KES 500 million, roughly $3.85 million, per the draft published by the National Treasury.
Payment processors sit lower at KES 50 million. Brokers and managers at KES 30 million. Still, for a sector built largely on peer-to-peer desks, small wallets, and early-stage fintechs, these figures sit far above what most have raised.
Robert Salim, CEO of VAAK, said many existing players would not qualify for a licence under the current draft. The regulated market, he warned, would narrow to a handful of well-capitalised regional entrants while most Kenyan operators get squeezed out.
The Business Daily Africa also reported firms flagging that the current rules could slow growth across the sector and push startups out of the Kenyan market.
Insurance, Fees, and an Ongoing Compliance Bill
Beyond the initial capital hurdles, licenced firms must secure comprehensive insurance covering theft, private key loss, operational failures, and cyber risk, from either a Kenyan-licensed insurer or an approved foreign provider. Salim called this an “insurmountable barrier” for dozens of smaller startups already operating without such cover.
Then come the fees. Virtual asset exchanges pay renewal fees equal to 2% of prior-year gross income, or at minimum KES 2 million. Wallet providers and token issuers pay 0.15% of turnover or a floor of KES 500,000. Upfront licence fees range from KES 500,000 to KES 2 million depending on category.
Compliance, in other words, becomes a permanent operating cost. Not a single registration event.
The 90% Warning
Salim’s estimate is pointed. He told TechCabal that over 90% of Kenya’s current informal or small-scale operators will either exit, go underground, or fail to qualify when the rules take effect. That leaves only the best-funded regional entrants standing inside the regulated perimeter.
“[The draft regulations] would create a compliance wall so high and uncertain that almost every rational participant, global exchanges, local wallets, Kenyan startups, and even regional stablecoin experiments, would simply walk away or geo-block Kenyan users. The licenced, transparent market would shrink to near zero, while the underground market, with zero consumer protection, worse AML leakage, and higher scam risk, would explode.”
VAAK is not calling for a regulation-free market. The association says it supports oversight and Kenya’s anti-money-laundering commitments. What it wants is proportionality.
What the Industry Is Actually Asking For
The proposals from VAAK target a few specific pressure points. The first is a substantial reduction in capital thresholds under the Fifth Schedule and Regulation 82 of the draft, preserving meaningful buffers without disqualifying virtually every existing Kenyan operator on day one.
The second concerns token disclosure rules. Salim says the draft treats modest token raises the same as full stock-market listings.
“Kenya risks recreating an IPO-level regime for even modest token raises. A clear de-minimis exemption and ‘lite’ white-paper tier would slash compliance costs by 70-80% while preserving investor protection.”
A third concern covers the discretionary powers regulators hold to reject licences, freeze assets, or revoke approvals. VAAK wants written reasons, defined timelines, rights to be heard, and independent appeal routes built into those processes.
“Our ask is to convert the current open-ended powers into structured, transparent, and reviewable processes. Done right, the powers will protect the system; done wrong, they will drive legitimate business and capital offshore,” Salim said.
The public consultation opened earlier this month, giving industry players a window to submit formal responses. What the National Treasury decides to do with those responses will shape whether Kenya builds a regulated crypto sector with local depth or one that functions only on paper, serving offshore players while domestic operators disappear.
Key Takeaways:
- Kenya’s draft crypto rules require up to KES 500M capital for stablecoin issuers, pricing out most local startups.
- VAAK warns over 90% of current small-scale crypto operators could exit or go underground under the proposed rules.
- Industry is asking for tiered capital thresholds, simpler token disclosure rules, and structured licence appeal rights.
