Quick Answer
Crypto is not illegal but remains unregulated in Kenya.
- It is not legal tender and is excluded from the formal financial sector.
- A regulatory framework is currently being developed by the government.
Legal Status of Crypto in Kenya
The legal status of cryptocurrency in Kenya currently exists in a regulatory gray area; it is not illegal to hold or trade crypto, but it is also not recognized as legal tender and remains largely unregulated. This ambiguity stems from the absence of crypto-specific legislation, forcing authorities to apply existing financial laws that were not designed for digital assets, which creates significant legal uncertainty. Key bodies like the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) have issued warnings and effectively excluded crypto from the formal banking sector. While specific crypto compliance rules are yet to be established, entities may still be subject to broader AML/CTF laws like the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA).
Current Regulations
At present, Kenya has no regulations specifically designed for crypto assets. Instead, regulatory matters are handled by applying existing financial laws, such as the Capital Markets Act and the Central Bank of Kenya Act, which creates significant legal uncertainty for the sector. In this vacuum, the Central Bank of Kenya has issued directives, including a public notice, cautioning financial institutions against dealing in virtual currencies, effectively pushing crypto-related activities out of the formal banking system.
Regulatory Authorities
Several regulatory bodies in Kenya are involved in overseeing and developing the enforcement framework for crypto.
- Capital Markets Authority (CMA): The CMA oversees Kenya's capital markets and is responsible for regulating securities, which can include certain crypto assets classified as investment contracts. It also investigates unauthorized crypto offerings and helps develop new policy frameworks.
- Central Bank of Kenya (CBK): The CBK is responsible for regulating Kenya's payment systems and ensuring financial stability, issuing warnings to financial institutions against dealing with virtual currencies. It also holds the sole authority to issue legal tender, a status that cryptocurrencies do not have.
- Financial Reporting Centre (FRC): As the country's primary anti-money laundering and counter-terrorism financing (AML/CFT) body, the FRC is tasked with identifying the proceeds of crime. It receives and analyzes suspicious transaction reports, including those potentially related to virtual assets.
- Directorate of Criminal Investigations (DCI): The DCI is the main law enforcement body responsible for investigating criminal activities, including crypto-related fraud and scams. It issues public alerts to warn citizens about fraudulent schemes and works with other agencies on enforcement.
- Kenya Revenue Authority (KRA): The KRA is responsible for tax administration and policy, including the enforcement of the digital asset tax on income from crypto transactions. It is also a member of the technical working group developing the broader crypto regulatory framework.
- National Treasury and Economic Planning: The National Treasury provides overall policy direction for the financial sector and chairs the inter-agency Technical Working Group tasked with developing a comprehensive regulatory framework for crypto assets. It coordinates the efforts of various authorities to create a cohesive national strategy.
Historical Context
Kenya's regulatory approach to crypto began with a cautionary public notice from the Central Bank of Kenya in December 2015, declaring virtual currencies were not legal tender. This hands-off, warning-based stance continued for years, with the Capital Markets Authority (CMA) issuing its own alerts starting in 2018. A major policy shift occurred in November 2023, when the National Treasury directed the creation of a comprehensive regulatory framework. This pivot from deterrence to proactive regulation led to the formation of a multi-agency Technical Working Group in 2024, tasked with drafting formal rules and aligning Kenya with global standards.
Compliance Requirements for Businesses in Kenya
While specific crypto regulations are still developing, businesses operating in or adjacent to the digital asset space are expected to comply with Kenya's existing Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) framework. Key requirements are rooted in legislation like the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA) and the Prevention of Terrorism Act (POTA). Essential compliance procedures include:
- Customer Due Diligence (CDD) and KYC: Businesses must verify customer identities, determine beneficial ownership, and assess the risk level associated with each client before establishing a relationship.
- Enhanced Due Diligence (EDD): For higher-risk customers, such as Politically Exposed Persons (PEPs), firms must apply stricter checks. This includes obtaining additional information, securing senior management approval, and conducting enhanced monitoring of the relationship.
- Suspicious Activity Reporting: Entities are obligated to promptly report any suspicious transactions to the Financial Reporting Centre (FRC) by filing Suspicious Transaction Reports (STRs).
- Record-Keeping: Transaction records, customer identification data, and supporting documents must be maintained for at least five years and be readily available for regulatory review.
- Internal Compliance Programs: Businesses must establish effective AML/CFT programs, which involves creating internal policies, appointing a compliance officer, conducting regular staff training, and performing independent audits.
Why this matters for Cross-Border Payments
For businesses engaged in cross-border payments, Kenya's regulatory ambiguity creates significant operational hurdles and legal risks. The exclusion of crypto from the formal banking system means converting digital assets to and from Kenyan Shillings is fraught with uncertainty, as financial institutions may freeze accounts or reverse transactions to comply with CBK warnings. This environment introduces payment delays, increases compliance costs for navigating the legal gray area, and can ultimately stifle the adoption of more efficient crypto-based solutions for international trade.
How Lightspark Enables Compliant Crypto-Native Payments
Lightspark provides infrastructure for instant, global payments built on Bitcoin. Its products, Lightspark Connect and Grid Switch, address key cross-border payment challenges. Connect allows businesses to access the Lightning Network natively, with Lightspark managing complex node and liquidity operations. Grid Switch enables regulated institutions to use domestic real-time payment systems to move fiat currencies globally, using Bitcoin as a neutral settlement asset, bypassing slow and costly traditional systems.
For regulated institutions navigating Kenya's legal landscape, Lightspark provides tools to aid compliance. The platform offers features like audit-ready reporting, flexible custody options, and built-in support for requirements like the Travel Rule and OFAC screening. This compliant-ready infrastructure helps businesses reduce the operational friction and legal uncertainty of cross-border crypto payments, allowing them to leverage digital assets while meeting their own regulatory obligations.
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Notice: This article is provided for informational purposes only and does not constitute legal advice.
Sources
- Arctic Intelligence. “AML/CTF Compliance in Kenya.” Arctic Intelligence, arctic-intelligence.com/countries/compliance-kenya.
- Central Bank of Kenya. “AML/CFT/CPF.” CBK, www.centralbank.go.ke/aml-cft-cpf/.
- International Monetary Fund, Monetary and Capital Markets Department. “Kenya: Technical Assistance Report-Crypto Regulation and Legislation.” Technical Assistance Reports, vol. 2025, no. 001, 8 Jan. 2025, doi.org/10.5089/9798400298233.019.
- Ndethiu, K. K. Public Notice: Caution to the Public on Virtual Currencies Such as Bitcoin. Central Bank of Kenya, Dec. 2015, www.centralbank.go.ke/images/docs/media/Public_Notice_on_virtual_currencies_such_as_Bitcoin.pdf.
