Kenya’s draft regulations for virtual asset businesses have proposed detailed standards for reserves, disclosure, and operational controls for firms that want to issue stablecoins—digital currencies pegged to fiat currencies—or tokenised real-world assets (RWAs), such as property or debt broken into digital units and traded online.
The proposed regulations, issued by the National Treasury on March 19, aim to bring the country’s growing virtual asset market under formal supervision and help pull the country off the Financial Action Task Force’s (FATF) grey list. Beyond consumer protection, the rules are designed to address FATF’s call for a legal framework to licence and supervise virtual asset service providers in a high-use market like Kenya, amid concerns that lightly regulated crypto activity can undermine anti-money-laundering safeguards.
Under the draft, any firm issuing a stablecoin to the public must hold local fiat-backed reserves at all times in high-quality liquid assets, such as cash or deposits with commercial banks or the central bank. These reserves must be segregated from the issuer’s own funds, held with an approved custodian, free from third-party claims, and available for immediate redemption.
Stablecoin issuers must also maintain a minimum paid-up capital of KES 500 million (approximately $3.85 million) and core or liquid capital of KES 100 million (about $771,000). Alternatively, they must hold capital equivalent to 100% of current liabilities for at least 30 days, whichever is higher.
Tokens must be redeemable at par value on demand. The draft rules also prohibit the payment of yield on stablecoins, including indirect yield offered through other licensed virtual asset businesses, a practice common in global crypto markets.
Stablecoins in Kenya fall under the Central Bank’s remit when they function as payment instruments and touch the national payments system, while tokenised RWAs that qualify as investment products are treated as securities and come under the Capital Markets Authority’s (CMA) oversight.
The regulations further introduce a disclosure framework for initial coin offerings (ICOs), tokenised RWAs, and stablecoins that closely resembles a full capital-markets prospectus.
White papers would be required to explain how a project operates, identify its management, outline how funds are managed, and detail how underlying assets are valued and held. They must also clearly set out key risks and refund rights.
Boards of directors would be explicitly responsible for the accuracy of these disclosures, and issuers would be required to file updates with regulators and include clear warnings that such products are not covered by investor compensation schemes.
Platforms conducting tokenised virtual asset offerings would also face capital requirements, including a minimum paid-up capital of KES 200 million (around $1.5 million) and core or liquid capital of KES 40 million (approximately $309,000), or 8% of total liabilities, whichever is higher.
Robert Salim, chief executive officer of the Virtual Asset Association of Kenya (VAAK), which represents around 50 virtual asset firms, said the disclosure and capital requirements are substantial.
“Kenya risks recreating an IPO-level regime for even modest token raises,” he said. “This mirrors the depth required for a full Capital Markets Authority prospectus—audited histories, governance, and comprehensive risk mapping—imposing legal drafting, review, and ongoing supplement costs that small community/utility token projects or early-stage RWA pilots simply cannot bear.”
The stablecoin rules are similarly stringent. Issuers would be required to fund recurring proof-of-reserves checks, annual independent reviews, and robust internal controls for custody and operations, in addition to meeting licensing fees that apply across the sector.
“Most Kenyan token raises are under KES 50–KES100 million ($386,000–$771,000) and target sophisticated or local investors,” said Salim. “Forcing them through the same disclosure machine as a Nairobi Securities Exchange-IPO will drive projects offshore or underground, reducing local experimentation in decentralised finance (DeFi), supply-chain tokenisation, and stablecoin pilots, while leaving retail investors with fewer compliant options.”
Salim described the design as “deliberately bank-like”, arguing that it sets a high bar that only large, well-capitalised operators, such as commercial banks or established international issuers, are likely to meet.
A Kenyan shilling-backed stablecoin, he added, would resemble a regulated e-money or narrow-bank product, limiting the number of firms that can operate it. Smaller local firms would face challenges meeting capital requirements, paying for custodians and audits, and maintaining the liquidity buffers needed for instant redemptions. Regional or global projects would need to consider whether Kenya’s single-market requirements justify the cost of establishing a local entity and infrastructure.
VAAK expects the framework will “produce at most a handful of licensed stablecoins, probably bank-issued Kenyan shilling coins or a couple of global USD ones with local wrappers,” providing consumer safeguards while limiting smaller or experimental projects.
The Treasury is currently accepting public comments before finalising the rules, with submissions expected to close on April 10. VAAK is advocating for a tiered approach, where only larger, mass-market offerings are subject to full prospectus-style disclosure, while smaller projects would use a lighter template with a summary, use-of-funds table, team and risk disclosures, and clear warnings.
The final rules will determine whether Kenya’s token market develops as a tightly supervised sector dominated by larger firms or maintains space for smaller stablecoin and tokenisation initiatives alongside the bigger players.
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