Kenya has new regulations on virtual currencies
Kenya has lowered the minimum paid-up capital required for stablecoin issuers by 40 per cent to Sh300 million, easing one of the biggest barriers to entry for firms seeking to operate in the country.
The government has, however, retained strict regulatory controls aimed at safeguarding investors in a fast-growing digital assets market.
The country’s virtual currency market was estimated to close at $400 billion (Sh520 billion) in 2024.
Experts believe the value has nearly doubled over the past two years.
The revised regulations, gazetted by the National Treasury last week, reduce the capital requirement from the Sh500 million proposed in draft rules published in March following consultations with industry players.
While the reduction is expected to make licensing more attractive for both local and foreign operators, the regulations leave in place an extensive supervisory framework that gives the Central Bank of Kenya (CBK) broad powers over stablecoin issuers and other virtual asset service providers.
Under the new rules, the CBK can order a licensed stablecoin issuer to suspend the issuance or redemption of tokens.
It can also direct licensed exchanges, wallet providers and other intermediaries to restrict, suspend or delist a stablecoin from trading.
The powers mean the central bank can effectively limit the circulation of offshore-issued stablecoins, such as those issued by global firms.
According to the amended regulations, the apex bank can force locally licensed platforms to stop offering them, even without directly licensing the foreign issuers.
The regulations come as Kenya cements its position as one of the world's leading cryptocurrency markets.
According to Bybit's 2025 World Crypto Ranking, Kenya ranked fifth globally in crypto adoption, with stablecoins accounting for a significant share of transactions due to their use in cross-border payments and as a hedge against currency volatility.
The framework also retains stringent reserve requirements.
At least 30 per cent of funds received in exchange for stablecoins must be held in segregated trust accounts in Kenyan commercial banks to facilitate issuance and redemption.
The remaining reserves must be invested in eligible assets within Kenya, while fiat-backed stablecoins must maintain reserves in the same currency as the token's peg.
Although Parliament's Committee on Delegated Legislation had recommended relaxing the local investment requirement, arguing it could discourage international issuers from entering the Kenyan market, the exchequer retained the provision.
The rule could, however, boost deposits held by local commercial banks if global issuers establish licensed operations in Kenya.
The licensing framework also
differentiates financial obligations between wallet providers and stablecoin
issuers.
While both will pay a Sh100,000 application fee, stablecoin issuers will require Sh300 million in paid-up capital compared to Sh150 million for wallet providers. Issuers will also pay a Sh2 million licence fee, four times the Sh500,000 charged to wallet providers.
In addition, stablecoin issuers must maintain liquid capital of at least Sh60 million or 100 per cent of current liabilities, whichever is higher, while wallet providers must hold Sh30 million or the equivalent of all current liabilities for at least 30 consecutive days.
The regulations also prohibit issuers from paying interest or any other rewards linked to the length of time customers hold stablecoins.
The broad definition of interest effectively bans yield-like incentives, including loyalty bonuses and holding rewards, requiring firms to compete primarily on payment and settlement services.
To strengthen consumer protection, every stablecoin must be fully backed on a one-to-one basis by eligible reserve assets, including cash, bank deposits, short-term government securities and other CBK-approved assets.
Reserve assets must be legally separated from a company's own funds and protected from creditors in the event of insolvency.
Issuers must conduct quarterly stress tests, submit monthly reports on reserves, circulation and transaction volumes, and ensure customers can redeem stablecoins at face value within two working days.
Furthermore, directors, senior executives and external auditors may also be held personally liable for investor losses resulting from misleading information contained in a stablecoin's white paper.
