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Kenya’s National Treasury has cut the minimum paid-up capital for stablecoin issuers to Sh300 million, down from a proposed Sh500 million, in the final Virtual Asset Service Providers Regulations gazetted this week.
The move follows months of consultations and lobbying from industry participants, who argued that the original thresholds would discourage investment and prevent local startups from entering the market.
The revised rules, announced by Treasury Cabinet Secretary John Mbadi, lower capital requirements for several categories of crypto businesses while retaining licensing and prudential safeguards under the Virtual Asset Service Providers Act, 2025.
The changes mark an important milestone in Kenya crypto regulation, balancing investor protection with efforts to foster innovation in one of Africa’s fastest-growing digital asset markets.
The revised regulations substantially reduce the paid-up capital that virtual asset firms must hold before receiving licences.
Under the new framework, stablecoin issuers the category with the highest capital requirement must maintain Sh300 million in paid-up capital, down from the initially proposed Sh500 million. Their liquid capital requirement has also been lowered to Sh60 million, or 100% of current liabilities for at least 30 days, compared with the earlier proposal of Sh100 million.
Other virtual asset businesses also received relief.
Virtual asset wallet providers will now require Sh150 million in paid-up capital, while tokenisation businesses must maintain Sh10 million in paid-up capital and liquid capital equal to Sh2 million or 8% of total liabilities. Initial Coin Offering (ICO) providers will need Sh20 million in paid-up capital and Sh4 million in liquid capital or 8% of liabilities. Notably, investment advisory firms will no longer face paid-up or liquid capital requirements, opening the market to individuals and smaller businesses.
The changes reflect the Treasury’s willingness to revise its approach after receiving feedback during public consultations on Kenya crypto regulation.
The revisions follow months of criticism from the Virtual Assets Association of Kenya (VAAK), which argued that the original proposals risked shutting out domestic entrepreneurs and discouraging international investment.
“For Kenya to attract credible global players, the paid-up capital requirements, licence fees, transaction fees and compliance requirements need to be reconsidered.” — Peter Onyango, Chairman, Virtual Assets Association of Kenya (VAAK)
Earlier this year, VAAK also warned that excessively high thresholds would undermine the objectives of Kenya crypto regulation by creating barriers for legitimate businesses while doing little to strengthen consumer protection.
“Kenya risks recreating an IPO-level regime for even modest token raises.” — Salim, Virtual Assets Association of Kenya (VAAK)
The association had proposed a more proportionate regulatory framework, including lower capital thresholds, clearer disclosure requirements and transparent licensing procedures. It also called for safeguards around regulators’ powers to revoke licences or freeze assets.
The Treasury’s decision to reduce capital requirements suggests many of those concerns were taken into account before finalising the regulations.
Although the capital thresholds have been lowered, the Treasury retained several safeguards intended to protect investors and strengthen financial stability.
Stablecoin issuers must continue maintaining reserves invested in low-risk assets, while virtual asset firms are required to hold sufficient liquidity relative to their liabilities. Annual licence fees for stablecoin issuers remain unchanged at up to Sh2 million.
The regulations implement the Virtual Asset Service Providers Act, 2025, which came into force in November last year and assigns joint supervisory responsibility to the Central Bank of Kenya and the Capital Markets Authority. The legislation establishes Kenya’s first comprehensive licensing and regulatory regime for virtual asset service providers.
Officials have repeatedly argued that formal oversight is necessary because the use of cryptocurrencies continues to expand across the country.
Businesses increasingly rely on stablecoins for cross-border trade, while members of the Kenyan diaspora use digital assets to send remittances home more quickly and at lower cost than traditional payment channels. At the same time, regulators remain concerned about risks linked to money laundering, terrorism financing and other illicit financial activity.
Earlier drafts of the regulations also proposed additional safeguards, including reserve requirements for stablecoin issuers, as policymakers sought to align Kenya crypto regulation with international anti-money laundering standards and recommendations from the Financial Action Task Force (FATF).
The latest revisions indicate that Kenya crypto regulation is evolving through consultation rather than rigid policymaking. By reducing capital barriers while preserving licensing, liquidity and compliance requirements, the Treasury appears to be pursuing a middle ground that supports innovation without compromising regulatory oversight.
As implementation begins, the effectiveness of Kenya crypto regulation will depend on whether the revised framework attracts new investment, encourages responsible market participation and provides sufficient protection for consumers in Kenya’s rapidly expanding digital asset economy.
Primary sources: Business Daily Africa
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