There’s a massive shift in the financial technology and digital assets ecosystem, and regulatory clarity is rapidly emerging as a cornerstone for sustainable growth. Governments and financial regulators worldwide, including in Kenya, are formalizing frameworks to govern Virtual Asset Service Providers (VASPs), seeking to balance innovation with financial security, consumer protection, and anti-money-laundering (AML) and counter-terrorism financing (CFT) compliance.

Fintechs at the intersection of payments, wallets, exchanges, tokenization, and cross-border settlement must now proactively prepare to align their operations with formal licensing regimes such as the Kenya Virtual Assets Service Providers Act (VASP Act).

For fintech founders, executives, compliance officers, and technology leaders, the journey to licensing under the VASP Act presents both challenges and strategic opportunities. This article offers a comprehensive roadmap; from regulatory readiness to technology partnerships designed to empower organizations to navigate the licensing process with confidence and precision.

Understanding the Regulatory Landscape: What the VASP Act Means for Fintechs

The Kenyan VASP Act establishes a legal framework requiring entities that provide digital asset services to register and obtain licenses from designated regulatory authorities before they can operate lawfully. This new crypto law mandates that virtual asset wallet providers, exchanges, payment processors, brokers, custodians, investment advisers, and token issuance platforms must be licensed.

Key regulatory imperatives include:

• • Mandatory Licensing: No person or entity may carry on virtual asset services, or represent that they do, in or from the jurisdiction unless they hold a valid license issued by either the Central Bank of Kenya (CBK) or the Capital Markets Authority (CMA), depending on the regulated activity.
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  • Legal Entity Requirements: Only a company limited by shares, incorporated locally or registered as a foreign entity complying with the Companies Act, is eligible for licensing.
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  • Physical Presence: VASPs must have a physical office and bank account within the jurisdiction.
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  • Governance and Fit-and-Proper Standards: Directors and senior officers must meet fit-and-proper standards, and demonstrate competence, integrity, and suitability.
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  • Operational Standards and Consumer Protection: VASPs must maintain adequate capital and insurance, segregate client assets, have effective complaint mechanisms, and operate transparently and fairly.
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  • AML/CFT/CPF Compliance: VASPs must implement robust AML and CFT frameworks and comply with data protection and cybersecurity regulations.

These provisions reflect global trends in digital asset regulation and align with international standards such as those articulated by the Financial Action Task Force (FATF). The regulatory intent is dual: to catalyze innovation while strengthening anti-financial crime defenses and protecting consumers.

Step-by-Step Preparation: Building a Licensing-Ready Fintech Operation

For fintechs pursuing a VASP license, preparation begins long before filing documents with the regulator. It requires structural alignment across corporate governance, risk and compliance, technology infrastructure, and enterprise operations. Below, we break these down into a systematic preparation strategy.

1. Establish Robust Corporate Governance

Regulators are increasingly scrutinizing governance frameworks to ensure that firms operate with transparency, accountability, and risk awareness.

Best practices include:

• • Board Composition and Fit-and-Proper Directors: Appoint board members and executives who demonstrate expertise in regulated financial services, digital assets, risk management, and compliance. Ensure that directors meet fit-and-proper tests, reflecting good character, experience, and absence of conflicts of interest.
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  • Defined Organizational Structure: Develop clear charters for key committees (risk, audit, compliance) that define roles, responsibilities, escalation paths, and oversight mechanisms.
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  • Conflict of Interest Policies: Adopt formal policies and procedures to identify and manage conflicts of interest effectively.
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  • Audited Financial Statements: Implement accounting controls and reporting systems that support annual audits, a regulatory requirement for VASP license holders.

These governance pillars are not only compliance requirements but foundational capabilities that signal to regulators and investors that a fintech is disciplined, resilient, and strategically mature.

2. Implement Comprehensive AML/CFT/CPF Frameworks

Anti-money-laundering, counter-terrorism financing, and counter-proliferation financing (CPF) frameworks are central to VASP licensing, reflecting global standards of risk mitigation and financial integrity.

Core elements of compliance infrastructure include:

• • Know Your Customer (KYC) and Enhanced Due Diligence (EDD): Use identity verification tools and risk-based customer onboarding practices to vet individuals and entities engaging with virtual asset services.
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  • Suspicious Transaction Monitoring: Deploy automated transaction monitoring systems capable of flagging unusual patterns consistent with money laundering or terrorist financing.
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  • Record Retention and Reporting: Maintain detailed records of virtual asset transactions and file suspicious activity reports with the relevant authority.
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  • Sanction Screening and Global Compliance: Ensure compliance with sanctions lists and cross-border regulatory obligations.

Regulators will assess the adequacy of these frameworks during the licensing review, placing significant weight on operational readiness and risk management capacity.

3. Build Resilient Technology and Cybersecurity Frameworks

VASPs operate on digital infrastructures built around software platforms, APIs, wallets, and settlement systems. Regulators are increasingly demanding strong technology governance to protect users and ensure operational continuity.

Key technology and cybersecurity considerations:

• • Secure APIs and Infrastructure: Design APIs that adhere to security best practices — encryption, authentication, authorization, and protection against threats such as DDoS attacks.
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  • Data Protection and Encryption: Implement governance mechanisms that ensure customer data is stored, processed, and transmitted in compliance with data protection laws.
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  • Business Continuity and Disaster Recovery: Prepare documented plans and tested procedures for continuity in the face of system failures or cyber incidents.
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  • Segregation of Client Assets: Technically and operationally ensure that client funds and virtual assets are segregated from corporate assets, reducing counterparty risk.

Technology infrastructure is not just a regulatory checkbox, it is the foundation of operational compliance. Digital asset platforms with weak security controls risk not only regulatory sanctions but also reputational damage and customer attrition.

Fortunately, API infrastructure providers like YoguPay manage the technical workload, delivering secure wallets and cross-border payment solutions that help businesses meet cybersecurity standards and achieve licensing requirements.

4. Prepare Licensing Documentation and Regulatory Filings

With governance, compliance, and technology foundations in place, fintechs must consolidate and submit comprehensive documentation that typically includes:

• • Business Plan and Operating Model
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  • Governance and Organizational Structure
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  • AML/CFT/CPF Policies
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  • Risk Management Framework
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  • Technology and Cybersecurity Policies
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  • Financial Statements and Proof of Capital Adequacy
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  • Compliance Manuals and Audit Reports

Regulators will use this documentation to assess readiness and suitability for licensing. Early engagement with legal counsel and regulatory specialists can improve application completeness and reduce back-and-forth during review.

Strategic Partnerships: Leveraging Third-Party API and Infrastructure Providers

While the preparatory tasks outlined above are essential, fintechs launching virtual asset services often benefit from strategic partnerships with third-party technology providers. These partners can accelerate time-to-market, strengthen compliance postures, and reduce in-house development overhead.

Among these partners, entities like YoguPay play a pivotal role in enabling compliant, scalable digital asset infrastructure.

Here’s how fintechs can leverage third-party providers effectively:

A. API-Infrastructure Providers

API infrastructure providers equip fintechs with secure, modular interfaces that abstract complex payment and asset workflows. These include:

• • Custodial and non-custodial wallet services
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  • Transaction processing APIs
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  • Payment rails and virtual asset transfers
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  • Compliance-ready data logging and reporting tools

By integrating with API infrastructure providers such as YoguPay, fintechs can adopt best-in-class security practices and compliance features without building them from scratch. This reduces development risk and supports more rapid progression toward licensing.

Additionally, YoguPay’s well-designed APIs help standardize audit trails and operational controls, which regulators appreciate as evidence of controlled technology environments.

B. Wallet-as-a-Service (WaaS) Partners

Wallet-as-a-Service providers deliver ready-to-use wallet platforms that can be customized and embedded within fintech applications. These capabilities are especially valuable given the regulatory focus on customer protection, asset segregation, and cybersecurity.

With a Wallet-as-a-Service partner, fintechs can benefit from:

• • Secure key management systems
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  • Regulated custody infrastructure compliant with AML/CFT rules
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  • User onboarding components aligned to KYC/EDD requirements
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  • Comprehensive logging and reporting for audits

This is one area where WaaS enablement companies like YoguPay stand out. It helps businesses to significantly de-risk their technology stack, while helping them meet licensing expectations for asset handling and internal controls.

C. Cross-Border Settlement Providers

Cross-border settlements, especially in the digital asset context, pose unique challenges related to foreign exchange, regulatory compliance across jurisdictions, and interoperability with traditional banking systems.

Fintechs can integrate with cross-border settlement networks offered by providers like YoguPay to streamline:

• • Multi-currency transfers with automated compliance checks
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  • Digital asset conversion and settlement workflows
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  • Reconciliation and reporting tools aligned to global regulatory standards

Such partnerships allow fintechs to extend their product offerings without having to master the intricate operational and compliance nuances of multi-jurisdiction settlement processes.

Post-Licensing Operations: Sustained Compliance and Growth

Obtaining a VASP license is a milestone; not the endpoint. Licensed fintechs must sustain compliance and adapt as regulators introduce new rules and guidance.

Ongoing Compliance Must-Haves:

• • Annual Audits and Financial Reporting — Continued demonstration of financial soundness.
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  • Regulatory Reporting — Regular submission of AML/CFT reports, incident reports, and transaction summaries.
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  • Risk Monitoring and Cyber Resilience — Continuous improvements to technology and security protocols.
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  • Consumer Protection Programs — Maintaining transparent pricing, clear terms of service, and dispute mechanisms.

The regulatory environment for digital assets is dynamic and continually evolving, requiring fintechs to stay vigilant and responsive. To remain compliant while maintaining seamless service delivery, businesses must actively monitor regulatory changes, engage proactively with authorities, and leverage strategic ecosystem partnerships.

Partnering with technology and infrastructure providers like YoguPay offers a significant advantage in this context. By providing robust API infrastructure, secure wallets, and cross-border payment capabilities, YoguPay enables fintechs to adapt their operational models quickly, meet compliance requirements efficiently, and focus on innovation without being bogged down by technical or regulatory complexities.

This combination of agility, compliance, and operational support allows fintechs to navigate shifting regulations confidently, reduce operational risk, and accelerate time-to-market for new digital asset services.

The Strategic Advantage of Early Preparation

Fintechs that treat regulatory readiness as an element of their business strategy rather than a compliance burden gain significant advantage:

• • Faster Time-to-Market: Pre-built integration frameworks such as API infrastructures and Wallet-as-a-Service platforms reduce development cycles.
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  • Investor and Customer Confidence: Licensed entities signal operational maturity and lower counterparty risk.
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  • Risk Mitigation: Well-governed compliance programs reduce exposure to fines, sanctions, and reputational damage.

Preparing for the VASP Act, or any equivalent virtual asset regulation, is not a one-off project. During this 12-month grace period, businesses that stay proactive will gain a competitive advantage by building strong compliance foundations, mitigating regulatory risk, and demonstrating operational maturity to regulators and customers alike.

By continuously enhancing governance frameworks, investing in secure and scalable technology infrastructure, and leveraging partnerships with experienced providers like YoguPay, firms can accelerate licensing processes, streamline reporting obligations, and ensure their virtual asset services are resilient, secure, and future-ready.

Conclusion

The path to licensing Virtual Asset Service Providers (VASPs) demands purposeful planning, cross-functional execution, and a deep understanding of regulatory expectations. Fintechs that proactively invest in governance, AML/CFT compliance, cybersecurity, documentation, and strategic technology partnerships will not only satisfy licensing prerequisites but position themselves as trusted, scalable, and resilient market players.

YoguPay provides end-to-end solutions; including cross-border settlement, API infrastructure, and Wallet-as-a-Service, offering fintechs the tools and platform components needed to build compliant, secure, and future-ready virtual asset services without having to reinvent every layer of the stack.

As virtual asset regulation continues to evolve globally, the interplay between compliance and innovation will define the competitive landscape. Fintechs that navigate this landscape with precision, purpose, and collaborative technology solutions will be best positioned to thrive in the licensed era of digital finance.

Learn how YoguPay enables secure, well-governed digital asset operations and supports a faster path to licensing. Visit our website or contact our team.