Kenya proposes strict crypto regulations with high capital requirements to formalize digital asset market

Kenya has taken a crucial step in defining its digital asset market. The government has released draft guidelines for crypto firms and digital asset service providers. These guidelines are designed to bring clarity and accountability to the growing sector and seek public input before April 10.

The proposed regulations, published by the National Treasury, will require firms dealing in digital assets to hold up to Sh500 million ($3.85 million) in paid-up capital.

Kenya sets new rules for crypto firms

In a public notice, the draft regulations set out how crypto exchanges, wallet providers, and other intermediaries in the crypto space could be licensed and regulated.

According to the ministry, the move is intended to protect consumers, prevent financial crimes such as money laundering, and provide clarity in a space that has operated largely without formal rules.

“The Regulations are issued pursuant to the Virtual Asset Service Providers Act, 2025 (Act No. 20 of 2025) to operationalise the Act, whose objective is to provide for the legal framework for licensing and regulating the activities of Virtual Asset Service Providers in and from Kenya,” the notice read.

The highest threshold will be for stablecoin issuers, firms that create digital currencies pegged to traditional currencies such as the dollar. They will have to have Sh500 million ($3.8 million) in paid-up capital and 100 percent of their liabilities matched by at least Sh100 million ($772,081) in liquid capital.

Other operators stand to face these regulations:

1. Tokenisation platforms and initial coin issuers: Sh200 million ($1.54 million).
2. Crypto exchanges and wallet providers: Sh150 million ($1.15 million).
3. Payment processors: Sh50 million ($385K).
4. Brokers and asset managers: Sh30 million ($231K).
5. Investment advisers: Sh2.5 million ($19K).

In addition, companies offering multiple services will have to comply with the capital requirements for each service they are licensed for, thereby increasing their capital burden.

Lastly, companies will have to maintain reserves for low-risk assets and liquidity commensurate with their liabilities. Regulators could impose higher capital requirements based on the company’s risk profile.

The licensing fees will range between KSh100,000 ($773) and KSh2 million ($15K). They are either renewable annually or 0.15 percent of gross turnover, whichever is higher.

Operational costs weigh heavily on global crypto exchanges

According to the 2025 World Crypto Ranking report by Bybit, Kenya ranks fifth in the world for crypto use. Kenya is only behind Ukraine, the USA, Nigeria, and Vietnam. 

Much of this activity is driven by stablecoins. Although the capital requirements may boost trust in the sector, they may also limit new entrants for startups.

Operational costs weigh heavily on global cryptocurrency exchanges in 2026, and this is a key challenge for both existing and new exchanges.

Global regulations, tax reporting requirements, anti-money laundering systems, and jurisdiction-specific laws require crypto exchanges to invest heavily in legal resources.

Recent estimates highlight the scale:

1. Monthly running costs for a typical crypto exchange can start around $163,000 (with base fixed costs and payroll near $105,000, plus additional budgets like $58,000 for marketing).
2. Decentralized exchanges (DEXs) face even higher averages in some models, around $468,000 monthly.
3. Maintenance and support alone often range from $10,000–$30,000 per month for CEXs.
4. Initial development for a good CEX can exceed $390,000–$1,340,000+, but the real pressure comes from recurring operational expenses.

Kenya expects crypto exchanges to have physical offices

Also, under the new draft, CEX providers will be required to maintain a physical office in the country. Moreover, directors and senior officers will be required to undergo a background and competence assessment by the regulators.

Under the draft rules, reserves will be restricted to highly liquid, low-risk assets, such as cash, central bank deposits, and short-term government securities with a maturity of no more than 90 days. There will also be a repurchase agreement with a maturity of no more than 7 days.

Also, stablecoin issuers will be required to hold at least 30 percent of customer funds in segregated accounts in commercial banks in Kenya.

Kenyans hold an estimated 1.2 trillion USD (155 trillion KES) in virtual assets, and the legislation provides critical safety rails to reassure investors and businesses that the country is a safe haven for new opportunities.

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