Kenya is shaping the future of its digital asset sector. However, some lawmakers believe the proposed rules need more work.
Members of Parliament recently reviewed draft regulations under the Virtual Asset Service Providers (VASP) Act. The law took effect in November 2025.
One provision drew particular attention. The draft requires stablecoin issuers to hold at least 30% of their reserves in commercial banks based in Kenya.
Lawmakers did not question the need for stablecoin regulation in Kenya. Instead, they questioned whether the proposed rules strike the right balance between consumer protection and innovation.
What Stablecoin Regulation in Kenya Proposes
The proposed framework introduces strict requirements for stablecoin issuers.
Under Regulation 72, every stablecoin operating in Kenya must hold reserve assets equal to the total value of tokens in circulation. Issuers must keep those reserves liquid and separate them from operating funds.
The regulation also protects reserve assets if an issuer becomes insolvent. Creditors cannot claim those funds.
Regulation 74 introduces a local reserve requirement. Stablecoin issuers must hold at least 30% of their reserves in Kenyan commercial banks.
The remaining reserves must stay in high-quality liquid assets. These may include cash or government securities with maturities of 90 days or less.
The framework also sets financial requirements. Stablecoin issuers must maintain KSh500 million in paid-up capital and KSh100 million in liquid capital.
In addition, issuers must conduct monthly reserve examinations and annual independent audits.
Regulators say these measures will strengthen trust in stablecoins and protect users.
How Kenya’s Rules Compare With Global Stablecoin Frameworks
Kenya joins a growing list of jurisdictions developing rules for stablecoins.
The European Union introduced stablecoin requirements through its Markets in Crypto-Assets (MiCA) framework. MiCA requires reserve backing and redemption rights. However, it does not require issuers to keep a fixed percentage of reserves within a specific country.
Hong Kong and Singapore have taken similar approaches. Their frameworks focus on reserve quality, liquidity, governance, and redemption obligations.
Kenya’s proposed 30% local reserve requirement stands out.
Supporters believe the rule will improve oversight. They argue that regulators can monitor stablecoin operations more effectively when part of the reserves remain within Kenya.
Critics disagree. They worry that international stablecoin issuers may avoid the market if compliance becomes too complex.
The debate highlights a challenge regulators face worldwide. They must protect consumers while keeping markets attractive to innovation.
Why the Capital Requirements Are Raising Questions
The proposed capital requirements have sparked another debate.
Interesting news to read: What CBN’s New Ownership Disclosure Rules Mean for Fintechs, Stablecoins, and Crypto Firms
Kenya’s stablecoin market remains relatively small compared to global markets. Yet the draft requires issuers to hold KSh500 million in paid-up capital.
That amount equals roughly $3.85 million.
Some observers believe the requirement prepares Kenya for future growth. Others argue it may discourage smaller players from entering the market.
The discussion comes as the global stablecoin sector continues to expand. Stablecoins now play an important role in payments, remittances, trading, and digital finance.
Supporters of stricter rules say regulators should prepare for future risks today. Critics argue that excessive requirements may slow innovation before the market matures.
Why Stablecoin Regulation in Kenya Matters Beyond Its Borders
The debate extends beyond Kenya.
Across Africa, regulators are examining how stablecoins fit into existing financial systems. Policymakers are paying close attention as adoption grows in cross-border payments, remittances, savings, and digital commerce.
Nigeria continues to develop digital asset frameworks. South Africa has also expanded its approach to crypto asset regulation.
As one of Africa’s leading fintech hubs, Kenya often influences regional conversations about technology and finance.
The final version of Kenya’s framework could shape how other African countries approach reserve requirements, licensing standards, and stablecoin oversight.
What’s Next for Stablecoin Regulation in Kenya?
Lawmakers did not reject the regulations.
Instead, they called for clearer drafting and stronger definitions. Committee members also recommended benchmarking exercises with countries that have more mature digital asset frameworks.
Under the proposed structure, the Central Bank of Kenya will supervise stablecoin issuers.
The Capital Markets Authority will oversee exchanges and tokenisation platforms.
The review process will continue before regulators finalise the framework.
Editorial Takeaway
Kenya’s lawmakers are confronting a challenge that regulators across Africa now face.
They must protect consumers without making compliance so expensive that innovation becomes difficult.
The proposed framework includes safeguards that many global regulators now consider standard. These include reserve backing, asset segregation, independent audits, and redemption protections.
However, questions remain. Many stakeholders still wonder whether the reserve requirements and capital thresholds match the current size of Kenya’s stablecoin market.
The final framework will do more than regulate stablecoins in Kenya. It could also influence how other African countries approach digital asset regulation in the years ahead.
