Kenyan Crypto Firms Object to VAC’s Regulatory Role in VASP Bill
Kenyan crypto startups are voicing concerns over the proposed Virtual Asset Service Providers (VASP) Bill, particularly the Virtual Asset Chamber of Commerce (VAC) being assigned a seat on the regulatory board under the new law. Industry stakeholders say the involvement of VAC, which is said to have financial ties to global exchange Binance, could pose a serious conflict of interest.
VAC has allegedly received $6,000 per month from Binance for lobbying and consulting. Some industry representatives have alleged that VAC has hosted policy discussions sponsored by Binance, raising concerns about the neutrality and transparency of the regulatory process.
Legal context and role of VAC
VAC director Basil Ogolla defended the role of the organization, saying it has been engaged in consultations with the IMF and the Central Bank of Kenya (CBK) over the past two years. He said the fact that VAC was invited by Parliament to join the governing council reflects confidence in its expertise and practical contribution to the development of the regulatory framework.
According to a technical report from the IMF, Kenya needs to enact regulations that comply with FATF Recommendation 15 on combating money laundering in digital asset markets by April 2025. The country’s technical working group has begun developing the regulatory framework since March 2024.
Why is this important?
According to Chainalysis, Kenya processes more than $105.6 billion in cryptocurrency annually – ranking fifth globally in terms of adoption. About 4.25 million people in Kenya own digital assets, or 8.5% of the population.
The VASP Bill 2025 would require mandatory licensing of all cryptocurrency service providers and would subject them to the supervision of the Capital Markets Authority and the Central Bank. It would also introduce anti-money laundering (AML) and financial compliance regulations, including a controversial 3% digital asset tax.
Potential impact on the industry
VAC’s inclusion on the council has raised concerns that advocacy groups could “take control of regulation.” This has been the case in Rwanda, where links between private parties and public authorities have put the country at risk of being placed on the FATF grey list.
Smaller exchanges in Kenya have expressed concerns that the cost of compliance with the new framework could eliminate competition and lead to the concentration of power in the hands of larger companies like Binance. The new law will also restrict unauthorized ICOs, with penalties of up to KES 30 million ($230,000) or 10 years in prison.
Regional and international implications
Countries like Uganda, Tanzania and South Sudan are closely watching Kenya’s regulatory move. Kenya’s emergence as a regional crypto hub could set a precedent for regulatory frameworks across East Africa.
In addition, the US’s Fannie Mae and Freddie Mac are considering allowing digital assets as collateral, a move Kenya could emulate if it wants to further legitimize and implement cryptocurrencies.
Future and Expectations
Despite the many controversies, the VASP Bill 2025 could help Kenya move closer to establishing a clear and friendly regulatory environment that will attract international investment and foster digital financial innovation. However, regulatory transparency and equitable stakeholder engagement will be vital to the long-term success of the regulatory framework.