Virtual Assets in Kenya: A 2026 Guide to Cryptocurrency, Regulation and Taxation
- Muhoro & Gitonga Associates
- Jan 26, 2024
- 7 min read
Updated: 2 days ago
Table of Contents
The Rise of Cryptocurrency in Kenya
Legal and Regulatory Framework
3.1 Central Bank of Kenya (CBK)
3.2 Capital Markets Authority (CMA)
3.3 Communications Authority of Kenya (CAK)
4.1 Finance Act 2023 and Digital Asset Tax
4.2 Finance Act 2025 and New Excise Duty Regime
4.3 Virtual Asset Service Providers Act 2025
Cryptocurrency Market Trends in Kenya
Opportunities in Cryptocurrency and Blockchain
Challenges and Risks of Cryptocurrency in Kenya
Trading and Investment Considerations
Taxation of Digital Assets in Kenya
Security and Consumer Protection
Emerging Startups and Innovations
How to Get Involved with Cryptocurrency in Kenya
Best Practices for Businesses and Individuals
1. Introduction
Cryptocurrency has become one of the most dynamic frontiers in Kenya’s financial and technological landscape. From facilitating diaspora remittances to enabling cross-border e-commerce, digital assets are reshaping how Kenyans save, trade, and invest.
However, the rapid growth of virtual assets has also triggered increased scrutiny from regulators and policymakers. The enactment of the Virtual Asset Service Providers Act, 2025 marks a turning point in Kenya’s approach; transforming a previously informal market into a regulated, structured financial sector.
This guide explains Kenya’s current legal and tax framework for cryptocurrencies, the opportunities and risks they present, and how businesses and individuals can participate responsibly.
2. The Rise of Cryptocurrency in Kenya
Kenya ranks consistently among Africa’s top three countries for cryptocurrency adoption, alongside Nigeria and South Africa. Studies estimate that Kenyans collectively hold over USD 1.5 billion worth of cryptocurrencies ; equivalent to roughly 2 percent of the national GDP.
This remarkable adoption is driven by:
High mobile-money penetration through M-Pesa and similar platforms.
Strong diaspora remittance flows seeking lower transaction fees.
Limited access to traditional banking services for rural populations.
A young, tech-savvy population exploring new investment frontiers.
The combination of innovation and necessity has positioned Kenya as a regional hub for blockchain entrepreneurship and virtual asset experimentation.
3. Legal and Regulatory Framework
Cryptocurrency regulation in Kenya has evolved from informal warnings to formal legislation. Several agencies now share oversight responsibilities.
The CBK maintains that cryptocurrencies are not legal tender in Kenya. Nevertheless, it has refrained from banning their use. In public advisories, the CBK cautions consumers about volatility and potential fraud while collaborating with global standard-setters to create a balanced regulatory environment.
The CBK also continues to explore Central Bank Digital Currency (CBDC) options for Kenya, though implementation remains under review.
The CMA regulates digital assets classified as securities, including tokenized investment products and Initial Coin Offerings (ICOs). The CMA’s Regulatory Sandbox allows fintech innovators to test blockchain and tokenization models under supervision before full licensing.
This framework ensures investor protection, anti-fraud controls, and fair-market transparency.
The CAK oversees the digital infrastructure supporting blockchain and cryptocurrency ecosystems, such as internet service providers, cloud data centers, and communication networks used for exchange operations.
Through the Kenya Information and Communications Act, the CAK helps ensure cybersecurity resilience and data integrity across virtual platforms.
4. Key Regulatory Developments
4.1 Finance Act 2023 and Digital Asset Tax
The Finance Act, 2023 was Kenya’s first legislation to formally tax cryptocurrency. It introduced a 3 percent Digital Asset Tax (DAT) on the gross fair market value of all digital asset transfers, including cryptocurrencies, NFTs, and tokenized instruments.
This tax applied to both local and foreign individuals involved in crypto transactions. Although criticized for its scope, it was a milestone acknowledging digital assets as legitimate taxable instruments.
4.2 Finance Act 2025 and New Excise Duty Regime
The Finance Act, 2025 repealed the Digital Asset Tax and replaced it with a 10 percent excise duty on the service fees charged by Virtual Asset Service Providers (VASPs) such as exchanges, brokers, or wallet operators.
This change aligns Kenya with global tax best practices by targeting the intermediaries’ income rather than the transaction’s full value. The Kenya Revenue Authority (KRA) retains authority to collect returns from VASPs, who must file periodic statements and withhold taxes on behalf of users.
Between 2023 and 2025, KRA reported over KSh 1.1 billion in revenue from the digital asset sector, demonstrating significant tax potential.
The Virtual Asset Service Providers Act (VASP Act), enacted in 2025, is Kenya’s first dedicated legislation governing cryptocurrency and blockchain activities.
The Act:
Mandates licensing of exchanges, custodial wallets, and brokers through the Capital Markets Authority.
Establishes Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) obligations consistent with the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA).
Introduces a Consumer Protection Code for dispute resolution and transparency.
Creates a regulatory sandbox for innovative blockchain products.
Requires VASPs to maintain records and submit annual compliance audits to CMA.
The VASP Act provides long-awaited legal clarity, supporting responsible innovation and investor confidence.
5. Cryptocurrency Market Trends in Kenya
Kenya’s crypto market continues to evolve rapidly across several domains:
Remittances: Lower-cost cross-border transfers via blockchain outperform conventional banking.
Trading and Investment: Platforms such as Binance, Yellow Card, and local startups like Bitkoin Africa attract growing participation.
Decentralized Finance (DeFi): Kenyans are accessing global DeFi platforms for lending, staking, and yield farming.
Tokenization: Real estate, carbon credits, and commodities are being digitized into tradable blockchain assets.
These trends reflect a vibrant ecosystem supported by regulatory maturity and increasing institutional interest.
6. Opportunities in Cryptocurrency and Blockchain
Kenya’s innovation-driven economy stands to gain immensely from blockchain adoption. Key opportunities include:
Financial Inclusion: Extending services to millions of unbanked citizens.
Blockchain in Agriculture: Transparent traceability for tea, coffee, and horticultural exports.
Digital Identity Systems: Secure verification for businesses and citizens.
Smart Contracts: Automated agreements for property, logistics, and fintech operations.
Tokenized Crowdfunding: Easier capital access for startups and SMEs.
7. Challenges and Risks of Cryptocurrency in Kenya
Despite progress, notable challenges remain:
Regulatory Ambiguity: Some overlap persists between CBK and CMA oversight.
Cybersecurity Risks: Exchanges face increasing attacks and wallet thefts.
Public Scams: Ponzi and fake investment schemes continue to target uninformed users.
Market Volatility: Drastic price swings discourage conservative investors.
Energy Use Concerns: Crypto mining’s environmental footprint remains under discussion.
A stable policy environment and stronger enforcement mechanisms are critical for sustainable growth.
8. Trading and Investment Considerations
Before engaging in digital asset trading, investors should:
Use licensed VASPs compliant with the 2025 Act.
Diversify portfolios rather than relying on a single token.
Maintain transaction records for taxation purposes.
Secure assets through hardware wallets and strong authentication.
Seek professional legal and tax advisory for compliance.
9. Taxation of Digital Assets in Kenya
Kenya’s current tax regime (as of 2025) operates under two principles:
Income and Capital Gains Tax:
- Traders may be taxed under the Income Tax Act (Cap 470).
- Disposals attract Capital Gains Tax (CGT) at 15 percent on net gains.
Excise Duty on VASP Service Fees:
- The Finance Act, 2025 imposes 10 percent excise duty on service charges by exchanges, wallet providers, or brokers.
- VASPs must remit this duty to KRA monthly.
Individuals and businesses should maintain detailed transaction logs and seek expert compliance advice.
10. Security and Consumer Protection
Security and privacy are top priorities in the digital asset space. Users should:
Enable two-factor authentication (2FA) on all exchange accounts.
Store significant holdings in offline or hardware wallets.
Avoid sharing seed phrases or private keys.
Report suspicious activity to the Office of the Data Protection Commissioner (ODPC), CMA, or CBK.
Use VASPs registered under the 2025 Act to ensure legal recourse and support.
11. Emerging Startups and Innovations
Kenya’s blockchain scene continues to expand with notable players such as:
AZA Finance (formerly BitPesa): Cross-border crypto payments.
Chipper Cash: Multi-currency remittance platform integrating crypto.
Kotani Pay: USSD-based blockchain payments for the unbanked.
Pesabase: Affordable international transfers via stablecoins.
Sarafu Network: Community token system supporting local economies.
These innovations demonstrate how blockchain is directly contributing to Kenya’s fintech leadership.
12. How to Get Involved with Cryptocurrency in Kenya
For individuals and businesses exploring entry into the sector:
Join Local Associations: Such as the Blockchain Association of Kenya (BAK) or Nairobi Ethereum Meetup.
Use Licensed Platforms: Engage only with CMA-registered exchanges or brokers.
Start Small: Learn trading dynamics before large investments.
Stay Informed: Follow updates from CBK, CMA, and KRA.
Consult Professionals: Ensure compliance with taxation and AML regulations.
13. Best Practices for Businesses and Individuals
Implement AML/CFT compliance frameworks from the outset.
Conduct Know-Your-Customer (KYC) checks on clients and partners.
Maintain transparent reporting and data protection practices.
Train staff on crypto handling and cybersecurity awareness.
Engage reputable legal counsel to ensure compliance with the VASP Act 2025 and tax laws.
14. Conclusion
Cryptocurrency in Kenya has moved from experimentation to formal recognition. The Virtual Asset Service Providers Act 2025 and the Finance Act 2025 mark a major regulatory milestone, balancing innovation with accountability.
As Kenya strengthens its position as a blockchain hub, investors and innovators must align with evolving compliance, taxation, and security standards. Properly managed, virtual assets will continue to drive financial inclusion, innovation, and global competitiveness.
15. FAQs: Virtual Assets in Kenya
Q1: Is cryptocurrency legal in Kenya?
Yes. Cryptocurrency trading is legal but regulated under the Virtual Asset Service Providers Act 2025.
Q2: What replaced the 3 percent Digital Asset Tax?
The Finance Act 2025 replaced it with a 10 percent excise duty on the service fees charged by VASPs.
Q3: Can I use cryptocurrency to pay for goods in Kenya?
Yes, but it is not legal tender. Acceptance depends on the merchant’s policy.
Q4: Which exchanges are licensed in Kenya?
Licensed VASPs appear on the Capital Markets Authority’s registry once fully operational under the 2025 Act.
Q5: How can I avoid scams?
Trade only via licensed platforms, secure your wallets, and avoid “get-rich-quick” schemes.
Q6: Are crypto gains taxable?
Yes. Trading income and capital gains are taxable under Kenyan law.
Q7: Who regulates cryptocurrency in Kenya?
The CBK, CMA, and CAK jointly oversee the sector, guided by the 2025 VASP Act.
Q8: Is mining cryptocurrency allowed?
Yes, but it is subject to general tax and energy-use regulations.
Q9: How does crypto promote financial inclusion?
It provides low-cost, accessible financial tools for unbanked populations.
Q10: What’s the future of crypto regulation in Kenya?
Expect enhanced enforcement under the VASP Act, tighter KYC controls, and regional cooperation with EAC regulators.
