By Victor Kyalo
NAIROBI, Kenya, Aug 7 – Kenya stands at a critical juncture in its economic future. On one side lies the potential to become Africa’s foremost hub for digital finance, drawing billions in investment, creating tens of thousands of jobs, and solidifying its leadership in technological innovation. On the other side lies the risk of financial instability, consumer exploitation, and a missed opportunity to shape one of the 21st century’s most transformative industries. The only thing standing between these two outcomes is legislative action.
After years of informal engagement with cryptocurrencies, decentralized finance (DeFi), and blockchain platforms, Kenya now has an opportunity to establish clear ground rules through the Virtual Asset Service Providers (VASP) Bill, currently before Parliament. The bill outlines a regulatory framework for licensing, supervision, and accountability of all actors operating in the digital asset economy. It would represent the most decisive step yet in Kenya’s digital financial evolution.
But hesitation is growing. There are calls to delay. There are concerns about burdens on startups and the need for further consultation. These are valid — but not sufficient to postpone action. The alternative to regulation is not neutrality. It is chaos.
With more than six million active users, Kenya ranks among the top adopters of digital assets on the continent. Cryptocurrency has evolved beyond a niche investment tool. It is now a core pillar of how young people save, how small traders remit payments, and how freelancers across borders get paid. Crypto wallets, DeFi apps, stablecoins, and NFTs are not abstractions — they are everyday tools for a rising generation of digital-first Kenyans.
Yet these services operate in a legal grey zone. There are no formal rules requiring custody safeguards. No clear dispute resolution mechanisms. No obligation for platforms to protect client data or funds. As the user base grows, so too does the risk. Every week that passes without legislation is a week in which thousands of transactions go unregulated, exposing users to fraud, theft, and abuse.
The Cost of Delay is Already Evident
Kenya has already experienced multiple crypto-related collapses that have wiped out savings and devastated families. These failures have typically involved platforms that promised high returns without any underlying accountability. In the absence of regulation, users had no recourse. Funds vanished. Operators disappeared. Public trust eroded.
Each scandal damages not only individuals but the ecosystem as a whole. Investors hesitate. Innovators relocate. The broader public becomes wary of engaging with digital tools that could otherwise democratize finance and foster inclusion. Delay, therefore, is not a neutral act — it is a catalyst for damage.
MPs must not waste time in moving the VASP Bill from the Report Stage to the Third Reading because delays at this point risk undermining Kenya’s momentum in digital finance, jeopardize public protection, and send mixed signals to investors in a highly competitive global digital economy.
At the Report Stage, the House has already debated the Bill extensively and proposed necessary amendments. Any further stalling now serves no practical legislative purpose—it only invites uncertainty and erodes confidence in Parliament’s commitment to progressive financial reform. Millions of Kenyans are already participating in the crypto economy without adequate legal protections, meaning each day of delay exposes users to scams, fraud, and loss without recourse.
Furthermore, Kenya is racing against time to maintain its leadership in Africa’s digital economy. Countries like South Africa, Nigeria, and Rwanda are moving fast with comprehensive crypto regulations. Prolonged inaction from Kenyan lawmakers creates a vacuum where local innovators lose ground, investors reroute capital, and startups face regulatory limbo.
Swift progression to the Third Reading ensures the Bill’s final version is passed into law through presidential assent, unlocking its benefits: a clear licensing regime, anti-money laundering rules, investor protections, and defined tax policies. It also positions Kenya as a serious, stable environment for Web3 innovation—crucial for attracting global partnerships and boosting youth employment.
Contrary to alarmist views, the proposed VASP Bill is not an attempt to suffocate innovation. It does not ban crypto or overreach into private wallets. Instead, it lays out a framework for providers offering services from, or into, Kenya.
It requires them to obtain licenses, maintain operational safeguards, and adhere to anti-money laundering (AML) standards. It defines virtual assets formally and brings them within the country’s financial oversight framework.
This clarity is crucial. It provides a pathway for local startups to grow within legal parameters, for investors to assess risk accurately, and for consumers to trust the platforms they engage with. It sends a signal that Kenya is open for innovation — but not at the cost of public interest.
Young People and Startups Must Be Protected — Not Patronized
One of the most significant arguments made against the bill is that it may exclude small startups and youth-led enterprises. There are concerns about licensing costs, reporting burdens, and bureaucratic delays. These concerns are real and must be addressed — but they are not arguments against the bill itself.
What is needed is not a rejection of regulation, but a refinement of it. Tiered licensing based on transaction volume, compliance sandboxes for early-stage projects, and grace periods for startups to reach full compliance can be built into the law. Waiting for the perfect bill only prolongs exposure to risk. A better approach is to legislate now and iterate later.
Moreover, failing to act harms young innovators more than it helps. Without a legal framework, most local Web3 entrepreneurs cannot partner with banks, raise capital from institutional investors, or expand beyond Kenya. The absence of regulation reinforces informality — not inclusion. A clear and fair framework will allow youth-led startups to thrive in the light, rather than survive in the shadows.
Around the world, regulators are moving fast to define the boundaries of digital finance. From Europe’s Markets in Crypto Assets (MiCA) framework to South Africa’s licensing regime for crypto exchanges, the international trend is clear: crypto is not going away, and it must be brought into the legal mainstream.
Kenya cannot afford to lag behind. Failure to move faster will keep isolating the country from global capital flows and make it less attractive for digital asset companies looking for a stable regulatory base in Africa. Already, countries like Rwanda and Mauritius are courting crypto firms with clear and innovation-friendly policies. Kenya, despite its reputation as a tech hub, risks losing this race.
Moreover, the geopolitical stakes are high. The future of trade, cross-border payments, and financial sovereignty increasingly depends on blockchain infrastructure. If Kenya wants to play a role in shaping these systems — rather than merely using ones developed abroad — it needs to regulate and build now.
Investors and consumers alike crave predictability. The absence of regulation creates a high-risk environment where only the boldest — or most reckless — operate. This dynamic excludes traditional financial institutions, mainstream investors, and risk-averse innovators who might otherwise contribute to building Kenya’s digital economy.
The VASP Bill provides a foundation for this predictability. It introduces oversight mechanisms, insurance requirements, capital adequacy measures, and KYC/AML protocols. It gives the government the tools it needs to combat financial crimes, enforce consumer protections, and collect taxes fairly. It also empowers regulators to evolve with the industry, allowing for future amendments as technologies change.
Every year without regulation translates to lost investments, stalled projects, and a growing underground economy. Crypto startups are unable to bank locally or attract venture capital. Consumers operate on foreign platforms with no legal ties to Kenya. Government agencies miss out on potential revenue and risk exposure to systemic threats.
In contrast, passing the bill would bring Kenya into alignment with global best practices, unlock innovation, and attract serious investment. It would also provide a platform for the country to lead regional harmonization efforts in East Africa — a strategic advantage in a world where cross-border digital finance is fast becoming the norm.
The risks of delay are too great. The rewards of action are too near. Kenya cannot afford to wait any longer.
Kyalo is a Nairobi-based blockchain community manager
