Table of Contents
TL;DR,
- The Virtual Assets Association of Kenya serves as the unified bridge between Kenya’s crypto industry and regulators (CBK/CMA), handling advocacy, standard-setting, and education to prevent bottlenecks in VASP licensing and compliance.
- Kenya evolved from issuing Bitcoin warnings in 2015 and facing FATF grey-listing in 2024 to establishing comprehensive VASP regulations and VAAK.
- After industry pushback, Kenya replaced a broad 3% gross transaction tax with a more targeted 10% excise duty on exchange and processor fees.
Digital assets, blockchain, and decentralized applications have carved a niche in the global economy, and East Africa’s powerhouse is kicking its regulation to the next step. Following the VASP regulation, the region announced the establishment of the Virtual Assets Association of Kenya (VAAK), a non‑political, non‑profit body created solely to house, steer, and lead Kenya’s virtual asset ecosystem through its regulatory period.
The Virtual Assets Association of Kenya (VAAK) the Missing Piece in Kenya’s Crypto Puzzle
The VASP Act 2025 delegates complete oversight, application, and regulation of crypto licenses in Kenya to the CBK and CMA. The CBK holds licensing authority over stablecoins and issuers whose activities could affect monetary stability, while the CMA oversees exchanges, trading platforms, wallet providers, brokers, and investment advisors.
This sets the functional foundation of the VASP regulations. Now the Virtual Assets Association of Kenya comes in as the regulatory glue, providing a unified, industry-wide platform governing the proceedings. It typically avoids the back-and-forth between the CBK and the CMA, who are already governing various economic factors within the country.
The VAAK is a follow-through ensuring no bottlenecks occur during the operationalization of the new framework.
As per the released announcements, the organization will handle:
Representation and advocacy form the foundation. The organizations will serve as a single voice representing industry views to the CMA, CBK, and other government bodies. Regulations often require an understanding of both the needs of stakeholders and local firms, as well as the legal requirements set by regulators. Under the VASP regulation, both aspects must be satisfied; hence, the VAAK
Industry Development’s main goal is to set standards and best practices for a wide range of activities, including trading platforms, custody solutions, advisory services, tokenization projects, stablecoin issuance, and blockchain applications that aren’t just for finance. The Kenya blockchain industry has grown on its own and in a somewhat random way. VAAK wants to set professional standards that will raise the level of the whole sector.
Education and awareness fill in a big gap. Kenya is one of Africa’s top three crypto powerhouses, yet most people still don’t know much about virtual assets and are often worried about fraud. The VAAK steps in to provide training programs and research projects and handle outreach programs to demystify viable blockchain products from scams.
Digital assets are the next evolution of finance, meaning their societal impact is profound. The VAAK will focus on ensuring the unbanked and underbanked population also benefit from this iteration.
Dr. Peter Onyango, serving as VAAK’s Founding Chairperson, stated:
“Kenya has always been a pioneer in digital finance. With the new regulatory framework now in place, we have a unique opportunity to build a mature, well-governed, and globally competitive virtual assets industry.
VAAK will champion collaboration, transparency, and responsible innovation, ensuring that this sector grows in a way that protects consumers, empowers businesses, and positions Kenya as a continental leader.”
Membership: who’s invited
Membership in the Virtual Assets Association of Kenya is open to licensed VASPs, blockchain innovators, fintech firms, technology developers, advisory professionals, and other stakeholders aligned with its mission.
The platforms’ structure aims to integrate the entire value chain, including operators, builders, and advisories.
CBK, one half of Kenya’s crypto regulators.[Photo: KenyanWallstreet]
Kenya’s regulatory journey: from caution to comprehensive framework
Kenya’s walk from skeptic to adopter has been full of milestones, rejection, and global pressure. Indeed, the adoption of crypto continues to increase, local builders thrive, and global institutions establish themselves.
The 2015 Warning
In December 2015, the CBK issued its first public notice characterizing Bitcoin and similar assets as “unregulated digital currency” lacking consumer protections. The warning followed BitPesa’s (later Paxful) entry into Kenya’s remittance market, offering blockchain-based transfers at approximately 3 percent commission.
The effects dramatically undercut traditional banking fees approaching 10 percent. When Safaricom initially blocked BitPesa’s M-Pesa access, the tension between innovation and oversight became unmistakable.
The 2018 Divergence
In February 2018, Kenya’s approach split intriguingly. ICT Cabinet Secretary Joe Mucheru announced a Blockchain and Artificial Intelligence Taskforce to explore how distributed ledger technology could improve government efficiency.
Yet that April, the CBK issued a formal circular warning banks against providing accounts to cryptocurrency entities—creating a “soft ban” that isolated digital asset businesses from the formal financial system without statutory prohibition.
The 2023 Tax-First Intervention
Kenya’s Finance Act 2023 introduced Africa’s first digital asset tax regime—a three percent levy on gross transaction values. Between September 2023 and June 2025, this crypto licensing in Kenya taxation approach collected 1.1 billion Kenyan shillings ($8.5 million).
But that April, the CBK sent out an official notice telling banks not to open accounts for cryptocurrency companies. This created a “soft ban” that kept digital asset businesses out of the formal financial system without breaking any laws.
However, when the tax came into question, many industry advocates challenged its applicability, citing it as economically distortive and discriminatory.
The Worldcoin Catalyst
A major turning point came when Worldcoin, a biometric identity project, ran in Kenya without permission until the government stepped in and stopped it in 2023.
Parliamentary investigations found dangerous gaps that allowed foreign companies to collect sensitive information, issue tokens, and possibly undermine sovereignty without clear legal consequences.
International Pressure
The Financial Action Task Force put Kenya on its grey list in February 2024 because Kenya lacked sufficient rules to stop money laundering, such as rules for virtual assets. This designation had economic effects. The European Commission then added Kenya to its list of high-risk jurisdictions, which meant that businesses had to follow stricter rules that could have raised costs by 30% and made foreign investment less likely.
These mounting pressures—domestic fraud cases, worries about sovereignty, and international compliance obligations—turned VASP regulation from a technical issue into an urgent political priority. The VASP Bill quickly passed through Parliament and was signed into law by the President on October 21, 2025.
The Tax Pivot
After a lot of pressure from the industry, the Finance Act 2025 replaced the three percent gross transaction tax with a 10 percent excise duty on transaction fees charged by exchanges and payment processors. This was a narrower, more defensible approach that went into effect on July 1, 2025.
VAAK can affect how rules are put into action. Will the capital requirements be set up so that local startups can compete, or will they unintentionally favor international platforms with a lot of money? Will the regulatory sandbox provide genuine pathways for innovation testing or become a bureaucratic holding pattern? Will commercial banks, who have effectively prohibited crypto businesses from opening accounts since the act’s passage, receive clear instructions permitting accounts for licensed VASPs?
These questions will determine whether Kenya’s framework enables innovation or merely contains it. The Association’s efforts to establish fair and balanced rules will also be evaluated.
