Introduction

Kenya’s digital economy is thriving, driven by the widespread adoption of mobile money, rapid fintech innovation, expanding cloud and data services, and the growing popularity of virtual asset trading among the youth. Yet, as digital transactions become core to the nation’s financial fabric, cybersecurity threats have risen in both scale and sophistication, demanding stronger safeguards and regulatory alignment.

Traditional cryptographic approaches, such as symmetric encryption of data are no longer sufficient for modern use cases, and key storage in centralized vaults also poses growing risks. These methods struggle in scenarios where multiple parties need to compute jointly on sensitive data or perform distributed custody without exposing full datasets or keys.

In this context, secure multi-party computation (MPC) emerges as a powerful cryptographic model. It moves the focus from protecting keys and raw data to protecting the computation itself by enabling joint data‑processing without revealing underlying inputs.

This article explores the concept of multi-Party Computation (MPC), examines how it intersects with Kenya’s cybersecurity and regulatory framework, and outlines what the future may hold for organizations navigating the country’s evolving digital landscape.

Understanding Multi-party Computation (MPC)

Secure Multi-Party Computation (MPC) refers to a class of cryptographic protocols that enable multiple parties; each possessing private data to jointly compute a function without revealing their individual inputs. In essence, MPC allows collaboration and data processing to occur securely, ensuring that only the final output is visible while all underlying information remains confidential.

Put simply, imagine several banks, each holding sensitive client data, wanting to calculate a joint risk score or identify fraud patterns across all their clients, without ever sharing their raw data with one another due to privacy or regulatory constraints.

With multi-party computation, each bank keeps its data hidden, yet they can go through a combined protocol and compute the result, without exposing their individual data sets. Key building blocks include secret sharing, garbled circuits (which let multiple parties perform calculations on private data without revealing individual inputs) or computation over encrypted data, threshold cryptography for key management, and interactive protocols that ensure correctness and privacy.

The technology has matured: Once a purely theoretical technology domain is now relevant for production use‑cases; such as collaborative fraud detection in finance, cross‑institutional healthcare analytics, privacy‑preserving machine‑learning, and secure key‑custody in crypto asset management.

Crucially, compared to standard encryption which protects data in transit or at rest, MPC protects data while in use. That means raw inputs never need to be decrypted or centralized, reducing risks of leakage, insider threat, or centralized compromise.

Kenya’s Cybersecurity and Regulatory Landscape

To understand how MPC can fit in Kenya, we must briefly review the relevant regulatory and cybersecurity frameworks. Kenya already has strong laws governing data protection and cybersecurity, including the Data Protection Act, 2019, the Computer Misuse and Cybercrimes Act, 2018 and the Kenya Information and Communications Act.

The Data Protection Act, 2019 imposes duties on data‑controllers and processors regarding personal data, data‑security, data subject rights, cross‑border flows, and breach‑notification. The Computer Misuse Cybercrimes Act focuses on cyber‑threats, offences and security obligations.

In addition, Kenya’s national cybersecurity strategy emphasizes resilience, standardization of controls, and protection of critical infrastructure. A compliance-driven approach by cross-border technology providers such as YoguPay aligns seamlessly with these frameworks, embedding cryptographic security, zero-trust architecture, and privacy-by-design principles into modern API-based payment infrastructure for regulatory integrity and scalable innovation.

Within this environment, a number of challenges remain:

• • Traditional encryption protects data when stored or transmitted, but when multiple parties need to jointly compute over data there is a gap: either data must be centralized or significant trust must be placed in a single party.
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  • Key‑management remains a weak link because if a central custodian holds all keys, a breach or insider compromise is catastrophic.
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  • SMEs, fintechs and government agencies often lack advanced cryptographic expertise or infrastructure, limiting adoption of newer technical safeguards.
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  • With the growth of mobile‑money, digital payments and distributed services there is increasing cross‑platform and cross‑institution data flows creating compliance and security challenges under national and international frameworks.

Therefore, there is emerging recognition that advanced cryptographic tools may be required to meet the objectives of innovation and compliance in Kenya.

What Does the VASP Act Introduce?

The Virtual Asset Service Providers Act, 2025 is Kenya’s landmark legislation creating a comprehensive legal framework for virtual assets (VAs) and Virtual Asset Service Providers (VASPs).

Key features include:

• • A definition of “virtual asset” as a digital representation of value that can be traded or transferred and used for payment or investment, excluding fiat, e‑money, securities.
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  • A definition of “virtual asset service provider” (VASP) as an entity conducting regulated services such as exchange, custodian, broker, and tokenization for clients.
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  • Licensing requirements: any person or entity providing virtual asset services in or from Kenya must obtain a license from a designated regulator, either the Central Bank of Kenya (CBK) or Capital Markets Authority (CMA) depending on the type of service.
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  • Firm operational requirements: licensed VASPs must maintain a Kenyan bank account, maintain segregated client‑assets, satisfy fit‑and‑proper criteria for directors/shareholders, adhere to AML/CFT/CPF obligations, adopt cybersecurity and data‑protection controls.
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  • Enforcement powers: regulators can inspect, supervise and sanction non‑compliant VASPs, with fines up to KSh 20 million or suspension of licenses.

The Act provides legal certainty for Kenya’s digital‑asset ecosystem, aligns the country with global regulatory trends and positions Kenya as a regional fintech hub.

API providers like YoguPay are developing MPC-secured infrastructure that aligns with the VASP Act. Their systems are designed to meet AML/CFT, cybersecurity, and data protection standards, ensuring compliant and resilient virtual asset transactions across jurisdictions.

How MPC Technology Aligns with Kenya’s Standards and the VASP Act

The convergence of MPC technology with Kenya’s cybersecurity and regulatory frameworks; especially under the VASP Act is evident across several dimensions:

Data Protection and Privacy

The Data Protection Act requires that personal data be processed lawfully, transparently and securely. Under the VASP Act, VASPs must protect client assets and client‑data. MPC supports this by enabling computations over private data without exposing raw inputs.

For example, in a multi-party analytics scenario involving several fintechs under the VASP regime, each party keeps its client data private while jointly computing a risk metric or fraud detection score.

No raw data leaves the institution because only the final computation result is revealed. This aligns with the privacy‑by‑design mandate, reducing risk of data exposure and helping firms satisfy regulatory expectations for confidentiality.

Cybersecurity and Resilience

The Virtual Asset Service Providers (VASP) Act mandates cybersecurity controls and incident‑reporting by VASPs. MPC inherently reduces the risk of a single point of failure, because key or data shares are distributed across multiple parties, ensuring that no one party ever holds the entire secret.

In a crypto‑custody or wallet context, MPC can support threshold‑signing; where multiple entities must collaborate to authorize a transaction, rather than one custodian holding the full key.

This strengthens key‑management, aligns with the Act’s expectation of client‑asset segregation and robust custody, and enhances resilience against insider threat or external attack.

Compliance-first API partners like YoguPay use threshold signing and distributed key custody across MPC infrastructure to eliminate single-custodian risk and meet VASP-level resilience requirements for digital asset custody.

Auditability, Trust and Regulatory Oversight

The VASP Act gives regulatory oversight to the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA). These regulators require firms to maintain strong governance, accurate records, and transparency in client asset segregation and solvency.

MPC systems permit verifiable output and audit trails, meaning the computation can be proved correct without exposing raw inputs. This supports regulatory assurance while preserving confidentiality.

Firms operating under Kenya’s crypto regulations can deploy MPC-based systems to demonstrate to regulators that computations; such as asset-liability matching, transaction monitoring, or multi-party risk scoring, are carried out correctly without exposing sensitive internal data.

AML/CFT and Cross‑Institution Collaboration

A major regulatory pillar of the Kenyan crypto law is the requirement for virtual asset service providers to conduct AML, CFT, and CPF risk monitoring, transaction screening, and suspicious activity reporting. Such analyses often require collaboration across institutions, ranging from multiple exchanges to wallet providers and banks to detect patterns of illicit activity.

But institutions hesitate to share proprietary transaction‑data or customer‑data for fear of privacy/regulatory risk. MPC enables exactly joint analytics without data exposure, thus Kenyan VASPs and other financial entities can cooperate to fulfil their regulatory monitoring obligations under the Act, without compromising data privacy or competitive secrecy.

API-driven infrastructure partners such as YoguPay who integrate MPC-enabled transaction verification and cross-border payment rails, are already helping businesses meet AML standards while scaling securely.

Innovation within a Regulated Framework

The recently passed cryptocurrency law places heavy regulatory obligations on digital‑asset service providers. For Kenyan fintechs and digital asset service providers, adopting MPC gives a means to satisfy these obligations while enabling advanced services like tokenization, stablecoins, wallet custody, and cross‑platform analytics that are compliant, auditable and secure by design.

Wallet-as-a-Service enablement platforms like YoguPay are leading this transformation by providing an API-first, MPC-powered infrastructure that helps fintechs build compliant, scalable, and secure cross-border payment solutions in Kenya.

Practical Applications of MPC in Kenya’s VASP Ecosystem

Here are concrete scenarios where MPC can be deployed within Kenya’s regulatory setting:

Crypto Exchanges and Wallet Providers (VASPs): A licensed crypto exchange under the VASP Act provides wallet custody services and manages user funds. By implementing an MPC-based key management system, the exchange meets the Act’s custody and client asset segregation requirements, reduces single-custodian risk, and enhances trust. In this setup, the custodian bank, wallet provider, and an independent auditor each hold key shares for threshold signing.

Tokenization Platforms: Suppose a consortium of banks issues a tokenized asset or stablecoin under the oversight of CBK/CMA as designated by the VASP Act. Multi-party computation can be used to compute issuance and redemption triggers across multiple banks, without any bank seeing full data of other banks, yet enabling joint governance and auditability.

Cross‑Platform Fraud Analytics: Kenya’s highly mobile‑money and fintech environment may involve collaborations between banks, telecoms, exchanges, and wallet providers. These entities could run MPC‑based joint transaction‑monitoring models to detect suspicious flows while preserving customer‑privacy and adhering to Data Protection Act obligations.

Public‑Sector Data‑Sharing: Government agencies and private fintechs under the Act may want to share analytical findings such as tax‑fraud detection, and citizen‑eligibility data without sharing raw citizen data. Using decentralized computation frameworks, they can compute results while preserving confidentiality, thereby aligning with Kenya’s cybersecurity and data‑protection frameworks.

Smaller Service Providers: Smaller Kenyan firms operating under the country’s digital asset regime may lack full cryptographic infrastructure. By partnering with distributed computation security providers or adopting MPC‑as‑a‑service, they can meet key‑management, auditability and client‑asset protection requirements with lower barriers to entry; thus supporting inclusive innovation under regulatory compliance.

Through MPC-as-a-Service models, API architects like YoguPay can help these entities implement secure key management, threshold signing, and joint computation frameworks without deep in-house cryptographic expertise.

Benefits and Challenges of Implementing MPC in Kenya

As Kenya’s digital asset ecosystem grows, securing sensitive data and private keys has become critical for Virtual Asset Service Providers and fintech firms. Multi-Party Computation (MPC) offers enhanced security and regulatory compliance by distributing cryptographic operations across multiple parties. However, its adoption comes with technical, operational, and regulatory challenges that must be carefully managed.

Benefits:

1. Enhanced Privacy-Preserving Computation

Multi-Party Computation (MPC) goes beyond traditional data protection by ensuring that sensitive information remains secure even while it is being used for computation. Unlike conventional methods, which only protect data in storage or in network communication, MPC allows multiple parties to compute results collaboratively without ever revealing the underlying data.

For Kenyan digital asset custodians, fintechs and banking institutions, this means that customer information, wallet balances, and transaction details can be processed securely without exposing critical details to any single entity, minimizing the risk of data leaks or misuse.

2. Reduced Risk of Centralized Key Custody

Traditional key management relies on storing private keys in one location or under the control of a single custodian. This approach creates a significant single point of failure, where if the key is lost, stolen, or compromised, the entire system is at risk.

MPC mitigates this by splitting cryptographic keys into multiple “shares” that are distributed across different nodes or parties. Transactions can be authorized without ever reconstructing the full key in a single location, reducing vulnerability to insider threats, external attacks, or accidental loss.

For Kenyan digital asset investors operating under the scrutiny of the VASP Act, this decentralized approach improves resilience and ensures that key management meets regulatory standards.

3. Enables Compliant Collaboration Across Institutions

MPC makes it feasible for multiple financial institutions, VASPs, and regulators to collaborate securely without exposing sensitive data. For instance, joint compliance checks, transaction validation, and fraud monitoring can be performed in a cryptographically secure manner, ensuring adherence to the VASP Act, Anti-Money Laundering (AML)/Countering Financing of Terrorism (CFT) regulations, and Kenya’s Data Protection Act.

By allowing institutions to share insights and verify transactions without disclosing raw data, this system helps foster a secure, compliant, and collaborative financial ecosystem. Global settlement companies such as YoguPay are advancing this vision by embedding privacy-preserving computation into cross-border and institutional payment infrastructures; bridging compliance and innovation across Kenya’s digital economy.

4. Builds Trust for Innovation

Deploying MPC signals a commitment to cutting-edge security and regulatory alignment, which is critical in Kenya’s emerging fintech and crypto ecosystem. Investors, regulators, and customers are increasingly concerned about cybersecurity risks and compliance.

Using MPC demonstrates that an institution prioritizes both security and regulatory adherence, building trust in digital financial services and encouraging adoption of innovative solutions such as crypto custody, decentralized finance (DeFi), and cross-border payments. By positioning themselves as leaders in secure digital infrastructure, Kenyan VASPs and fintech firms can enhance their reputation and attract greater market participation.

Challenges:

1. Technical Complexity

Implementing MPC protocols is not trivial. It requires deep cryptographic expertise, careful system design, and thorough testing to ensure security guarantees are met. Kenyan VASPs may face challenges in finding skilled personnel capable of designing, deploying, and maintaining MPC-based systems, which can slow adoption.

2. Performance and Cost

MPC operations typically involve higher computational and communication overhead compared to conventional key management approaches. This can result in increased transaction latency and higher operational costs. For smaller Kenyan fintech firms or startups, these resource demands may pose financial or performance constraints, making careful cost-benefit evaluation essential.

3. Infrastructure and Scalability

MPC relies on a distributed architecture, requiring secure channels between parties, proper secret-sharing mechanisms, and coordination among multiple nodes. Scaling such systems for high transaction volumes or multiple institutions in Kenya can be challenging, especially if existing infrastructure is not optimized for distributed cryptographic operations.

4. Regulatory and Legal Understanding

While Kenya’s VASP Act mandates strong controls on digital asset security, regulators and industry stakeholders may still need guidance on auditing and certifying MPC systems. Questions remain, such as how distributed key shares and threshold signing will be treated during inspections or compliance checks, creating potential legal and operational ambiguity.

5. Market Readiness

Successful MPC adoption depends on awareness, training, and change management. Kenyan firms may require capacity building in cryptography, secure computation, and compliance workflows. Without proper education and stakeholder engagement, MPC deployment risks being underutilized or mismanaged.

6. Collusion Risk and Protocol Assumptions

MPC protocols assume that a threshold of parties behaves honestly. If collusion or malicious actions occur, the security guarantees can be weakened. Careful protocol design, rigorous testing, and operational monitoring are essential to prevent such vulnerabilities from undermining trust in MPC implementations.

As a regulated API provider, YoguPay demonstrates how MPC can enhance cybersecurity in fintech, strengthen regulatory compliance, and build customer trust in Kenya’s fast-growing digital asset ecosystem.

Recommendations and Future Outlook

To ensure Kenya maximizes the synergy between MPC technology and its regulatory/cybersecurity standards, the following recommendations are offered:

For Fintechs and VASPs:

• • Evaluate MPC solutions; either in‑house or via trusted providers specifically for key‑custody, cross‑institution analytics, AML detection and wallet services.
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  • Prioritize use‑cases where privacy, regulatory compliance and collaboration are key differentiators; including multi‑institution fraud detection, wallet custody, and tokenization.
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  • Invest in cryptographic and secure‑computing capability; such as training, secure‑engineering, and audit‑capabilities to gain competitive advantage and regulatory trust.
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  • Collaborate with regional API architects and cross-border payment enablers like YoguPay, whose WaaS-ready infrastructure and MPC-secured rails can lower barriers to adoption while ensuring full alignment with the VASP Act’s compliance and cybersecurity requirements.

For Regulators and Policymakers:

• • Issue guidance or sandbox frameworks explaining how advanced cryptographic techniques including MPC satisfy the requirements of the VASP Act.
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  • Develop audit standards for MPC‑based systems: what logs, proofs, verifications regulators require to inspect threshold‑signing, distributed key‑shares, and joint computations.
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  • Consider grants, tax relief, and innovation hubs for smaller fintechs to adopt secure‑computation technologies, bridging the technical gap.
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  • Encourage public‑private collaboration and awareness‑campaigns on advanced cryptography and its role in a secure digital‑asset ecosystem.

Strategic Outlook for Kenya:

Kenya is well placed to become a regional leader in secure digital‑asset services. With the strong mobile‑money foundation (M-Pesa, Airtel Money, Payless), robust regulatory momentum and rising fintech capacity, adoption of MPC can be a differentiator.

Firms and regulators that embed privacy‑preserving computation will build deeper trust, compete regionally, and stay ahead of evolving threats. As virtual‑assets, tokenization and blockchain ecosystems expand, Kenya’s ability to align innovation with strong security and compliance frameworks will be a key asset.

Partners developing MPC-secured API infrastructures, including YoguPay, are positioning Kenya at the forefront of compliant, innovation-driven finance. By bridging regulation, technology, and scalability, they’re enabling the next phase of secure cross-border payments and digital asset growth in the region.

Conclusion

Moving from keys to computation marks a fundamental shift in modern digital asset protection, where safeguarding computation itself has become more critical than merely securing keys or encrypted storage. This shift is especially vital when multiple parties, sensitive data, and regulatory obligations intersect.

In Kenya, the regulatory framework defined by the Virtual Asset Service Providers (VASP) Act, the Data Protection Act, and emerging cybersecurity and fintech policies creates both a demanding and enabling environment. Secure Multi-Party Computation (MPC) stands out as a key technology that aligns advanced cryptography with Kenya’s standards of privacy, security, and compliance.

As one of Africa’s most dynamic digital economies, Kenya is witnessing the rise of API architects like YoguPay, who are embedding MPC and zero-trust principles into cross-border payment and wallet infrastructure. This approach empowers fintechs and VASPs to innovate with confidence while maintaining regulatory integrity.

Explore compliant API infrastructure built for the future of digital finance at www.yogupay.com or contact us to learn more.