Centralized exchange in Kenya
Order-book exchange that takes custody of user assets and matches trades between users.
CEX is conditionally permitted in Kenya with a local entity, subject to AML obligations and high licensing burden.
Verdict Details
- Permitted
- conditional
- Local entity required
- Yes
- Licensing burden
- High
- Last updated
- 2026-07-13
AML Obligations
- Customer Due Diligence (CDD): Verify customer identities, maintain UBO records, apply EDD for high-risk relationships (e.g., cross-border VA activities) per POCAMLA standards applied to VASPs.
- Suspicious Transaction Reporting (STR): Report suspicious activities involving virtual assets to the Financial Reporting Centre (FRC) promptly.
- Record-Keeping: Retain transaction records, customer data, and verification documents for at least 7 years.
- Travel Rule obligations are expected to apply under the VASP Act 2025 and Draft Regulations (2026); specific thresholds not yet finalized.
- Licensing from CMA under the Virtual Asset Service Providers Act, 2025 and Draft VASP Regulations, 2026, which impose full AML/CFT compliance programs.
Key Restrictions
- Must obtain a license under the Virtual Asset Service Providers Act, 2025 and comply with Draft VASP Regulations, 2026.
- Must maintain a physical office in Kenya (local entity incorporation required).
- Asset segregation required — e.g., 30% of customer stablecoin funds must be held in Kenyan banks.
- Exchanges offering securities-like crypto assets fall under CMA oversight under the Capital Markets Act.
- CBK regulates payment-system interfaces and stablecoins; any fiat on/off-ramp ties require CBK compliance.
- Geofencing / blocking of US persons may be required depending on token listings and securities classification.
Key Risks
- Enforcement precedent: CBK has successfully forced termination of crypto-related money remittance services (Bitpesa/Lipisha) for operating without authorization.
- Criminal enforcement: DCI Crypto Fraud Unit has handled 500+ cases and made dozens of arrests (2024), indicating active law enforcement scrutiny.
- Regulatory ambiguity: Draft VASP Regulations (2026) are not yet finalized; requirements may shift before finalization.
- Tax exposure: KRA actively taxes crypto income; unclear capital gains vs. income tax treatment may create reporting risk.
- Worldcoin enforcement shows regulators are willing to use data protection laws aggressively against crypto operators collecting biometric data.
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
Kenya's Virtual Asset Service Providers Act, 2025 is Act No. 20 of 2025; it received presidential assent on 15 October 2025, was published in Kenya Gazette Supplement No. 173 (Acts No. 20) on 21 October 2025 and commenced on 4 November 2025, and its implementing regulations were gazetted as Legal Notice No. 134 of 2026 on 22 July 2026.
The Virtual Asset Service Providers Regulations, 2026 stopped being a draft on 22 July 2026, when they were gazetted as Legal Notice No. 134 of 2026 in Kenya Gazette Supplement No. 185; they run to 151 regulations in fifteen parts and six schedules and impose licensing, capital, AML/CFT/CPF, cybersecurity, custody, market-conduct and stablecoin reserve duties that are now in force.
The Capital Markets Authority licenses and supervises virtual asset exchanges, virtual asset brokers, virtual asset investment advisers, virtual asset managers, virtual asset offering providers conducting initial coin offerings, tokenisation providers and token issuance platforms under the First Schedule to the Virtual Asset Service Providers Act, 2025, and section 11(3)(fb) of the Capital Markets Act now requires it to regulate virtual asset service providers.
The Capital Markets Authority licenses virtual asset exchanges, brokers, investment advisers, managers, initial-coin-offering providers, tokenisation providers and token issuance platforms under the First Schedule to the Virtual Asset Service Providers Act, 2025; the implementing rules stopped being drafts on 22 July 2026, when the Virtual Asset Service Providers Regulations, 2026 were gazetted as Legal Notice No. 134 of 2026 in Kenya Gazette Supplement No. 185.
The Capital Markets Authority administers the Capital Markets Act and, since the Virtual Asset Service Providers Act, 2025 commenced on 4 November 2025, regulates virtual asset service providers under section 11(3)(fb) of that Act; the virtual-asset rules are no longer draft, having been gazetted as Legal Notice No. 134 of 2026 on 22 July 2026.
The Central Bank of Kenya licenses virtual asset wallet providers, virtual asset payment processors and stablecoin issuance under the First Schedule to the Virtual Asset Service Providers Act, 2025, and section 4A(1)(dc) of the Central Bank of Kenya Act now empowers it to license and supervise virtual asset service providers; virtual asset exchanges are licensed by the Capital Markets Authority and fall outside the Central Bank's perimeter.
Kenya's financial intelligence unit is the Financial Reporting Centre, established under the Proceeds of Crime and Anti-Money Laundering Act, which receives and analyses suspicious transaction reports; AML/CFT/CPF supervision and enforcement for virtual asset service providers is carried out by the Central Bank of Kenya and the Capital Markets Authority under section 32 of the Virtual Asset Service Providers Act, 2025.
Virtual asset service providers licensed in Kenya must perform customer due diligence before onboarding a client under regulation 32 of the Virtual Asset Service Providers Regulations, 2026, carried out in accordance with the Proceeds of Crime and Anti-Money Laundering Act, and the Second Schedule to the Virtual Asset Service Providers Act, 2025 makes every virtual asset service provider a reporting institution under that Act.
The Second Schedule to Kenya's Virtual Asset Service Providers Act, 2025 amends the Proceeds of Crime and Anti-Money Laundering Act so that the definition of reporting institution expressly includes a virtual asset service provider, which places Kenyan virtual asset service providers under the suspicious transaction reporting duty owed to the Financial Reporting Centre with effect from the Act's commencement on 4 November 2025.
Kenyan virtual asset service providers must keep a record of both client and own transactions for not less than seven years from the date of the transaction under section 44(2) of the Virtual Asset Service Providers Act, 2025, repeated at regulations 22(1)(b) and 26(3) of Legal Notice No. 134 of 2026, and must give the regulator online read-only real-time access to those records under section 44(1).
Kenya's 3 per cent digital asset tax under section 12F of the Income Tax Act, introduced by section 10 of the Finance Act 2023 from 1 September 2023, was repealed and replaced from 1 July 2025 by excise duty at 10 per cent of the excisable value of fees charged on virtual asset transactions, which the provider collects and remits to the Commissioner on or before the twentieth day of the following month; the Virtual Asset Service Providers Act, 2025 made no tax amendment.
The Cabinet Secretary responsible for the National Treasury makes regulations under section 49 of the Virtual Asset Service Providers Act, 2025 and may designate further regulatory authorities under section 5(c); the National Treasury published the draft Virtual Asset Service Providers Regulations, 2026 with a Regulatory Impact Statement for comment by 10 April 2026, and the Act itself creates no technical working group and names no chair.
Entity targeted: Bitpesa (operating through Lipsha Consortium Limited). Violation type: Operating money remittance business via Bitcoin without CBK authorization; AML/KYC non-compliance due to cryptocurrency anonymity. Penalty amount: None specified (service termination, not direct fine).
Directorate of Criminal Investigations (DCI) Crypto Fraud Unit: Handled over 500 crypto-related cases in past three years; dozens of arrests in 2024. High-profile busts in Nairobi and Nakuru targeted scams worth $119,000, $100,000, and $30,000 (no named entities or penalties detailed). Losses totaled $43.3 million in 2024 scams.
The Office of the Data Protection Commissioner issued suo motu determination ODPC/COMP/1394/2023 on 6 September 2023 against Worldcoin Foundation, Tools for Humanity and Tools for Humanity GmbH over biometric iris data collected in Kenya; the general penalty in section 73 of the Data Protection Act, No. 24 of 2019 is a fine not exceeding three million shillings or imprisonment not exceeding ten years or both, while the Data Commissioner's administrative penalty notice under sections 62 and 63 is capped at five million shillings or one per cent of an undertaking's preceding annual turnover, whichever is lower.
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- medium
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Conditional — a centralized exchange may operate in Kenya by obtaining a VASP license under the Virtual Asset Service Providers Act, 2025 (with Draft Regulations, 2026), incorporating locally, maintaining a physical office, segregating customer assets (e.g., 30% stablecoin reserves in Kenyan banks), and complying with CMA/CBK oversight and full AML/CFT obligations including CDD, STR, and record-keeping, but the regime is still being finalized via draft regulations.
Questions this verdict aims to answer
- What exchange / VASP license applies?
- What custody segregation rules apply to user assets?
- What market-conduct and listing rules apply?
- What travel-rule obligations apply on withdrawals?