Crypto Firms Warn Capital, Licensing Rules Risk Driving Out Startups

Kenya’s draft VASP crypto rules demand up to Sh500M in capital from stablecoin issuers, and startups say that’s enough to wipe them off the map.

Kenya ranked fifth globally in transactional crypto use last year. Only Ukraine, the US, Nigeria, and Vietnam placed higher. That standing now sits under pressure from inside the country’s own policy process.

The National Treasury published draft Virtual Asset Service Providers Regulations 2026 on March 17. Public comment closes April 10. What the draft contains has set off a sharp response from local firms and industry groups who say the capital thresholds will push startups out before they even get started.

Sh500 Million Wall Rattles Local Players

Stablecoin issuers draw the steepest requirement. Under the draft rules, they must hold Sh500 million in paid-up capital. On top of that, liquid capital must sit at Sh100 million or 100 percent of current liabilities, whichever lands higher.

Crypto exchanges and wallet providers face a Sh150 million floor. Tokenization platforms and initial coin issuers are pegged at Sh200 million. Payment processors at Sh50 million. Brokers and managers at Sh30 million.

Firms offering multiple services must meet each category’s threshold separately. That stacks the financial burden fast.

The Virtual Asset Association of Kenya, VAAK, pushed back hard. Its chair Salim warned the rules would create “a compliance wall so high and uncertain that almost every rational participant would simply walk away or geo-block Kenyan users.” The licensed market, he said, could shrink to near zero. Meanwhile the underground market, with no consumer protection and higher scam risk, would expand to fill the gap.

Most Operators Do Not Qualify Today

That concern is grounded in market reality. Kenya’s crypto base was built on peer-to-peer desks, small wallets, and early-stage fintechs. Most have not raised anywhere close to these thresholds. Many existing operators would not qualify for a licence right now under the draft as written.

VAAK is not arguing against regulation. The association says it wants a proportionate approach, one that protects users and meets Kenya’s anti-money laundering commitments without locking out the players who built the market.

@moneyacademyKE said on X that Kenyan crypto firms are demanding lower capital requirements and simpler licensing rules, warning the current draft could slow growth and push startups away entirely.

Stablecoin issuers carry another requirement beyond the capital threshold. They must hold at least 30 percent of customer funds in segregated accounts at commercial banks domiciled in Kenya. The rest must go into high-quality liquid assets. Quarterly verification audits add yet another recurring cost.

FATF Pressure Behind the Urgency

Kenya landed on the Financial Action Task Force grey list in February 2024. That designation carries real consequences for correspondent banking access. It forced the government’s hand.

The Kenya VASP Act passed in October 2025. President William Ruto signed it into law. It came into force November 4. The draft regulations are the operational layer meant to bring the Act to life.

The dual-regulator structure splits oversight between two bodies. The Central Bank of Kenya licenses payment-related firms and stablecoin dealers. The Capital Markets Authority supervises exchanges, brokers, and tokenization platforms. Only locally incorporated companies qualify for full licensing. Foreign firms need a compliance certificate before they can even apply.

Some stakeholders are already calling for a tiered structure. Stricter standards for large-scale issuers. Lower thresholds for smaller projects. That approach would let regulators meet FATF requirements without emptying the local market.

50 Global Firms Are Watching the Final Text

Around 50 global crypto firms are eyeing Kenya as a regional headquarters through the Nairobi International Finance Centre. Binance confirmed it is in that group. Its Africa legal head Larry Cooke said entry depends on whether the final regulations come out “balanced, fair, and robust.”

The NIFC offers regional HQ firms a 15 percent corporate tax rate for the first 10 years and 20 percent for the next decade, against the standard 30 percent rate. That incentive brought the interest. The capital requirements could kill it.

This is not a small-market question. Africa’s crypto growth has drawn serious global attention, with Sub-Saharan Africa recording over $205 billion in on-chain value in the past 12 months alone. Kenya sits at the center of that story. Whether it stays there depends heavily on what happens between now and April 10.

Industry stakeholders have until that date to submit feedback. Nationwide public forums started March 30. What gets adjusted, and what stays in the final gazette, will determine who gets to operate in Kenya’s crypto market and who does not.

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