Nairobi, Kenya – November 24, 2025

Kenya’s Virtual Asset Service Providers (VASP) Act, which officially came into effect on 4th November 2025, has set the stage for one of the most important regulatory transitions in the country’s digital finance ecosystem. With the law now active, attention has turned to the development of subsidiary legislation that will turn legislative intent into operational reality.

For the VASP ecosystem, this phase matters even more than the passage of the Act itself. It is here that regulators will define the rules that shape market entry, competitiveness, investor protection, and long-term industry viability.

While the Act introduces clear licensing, governance, and consumer-protection rules, its most consequential element for digital asset investors is captured in Section 47: the Transitional and Saving Provisions. This clause grants Virtual Asset Service Providers (VASPs) a critical 12-month grace period to align with the law.

A Defining Break from the Unregulated Era

Before the Kenya Virtual Assets bill was signed into law, exchanges, wallet providers, brokers, custodians, OTC traders, and other digital asset investors operated in a regulatory grey zone. There were no licensing rules, no prudential thresholds, and no clear authority in charge.

The Act now states that: No person may carry on, or even purport to carry on, virtual asset service business without a license. Without a transitional clause, this would have effectively outlawed the entire industry overnight, and this is where Section 47 provides a one-year lifeline for VASPs.

The provision states that;

“Upon the commencement of this Act, any person providing virtual asset services shall, within one year of the commencement, comply with the provisions of this Act.”

This window is not a delay. It is a compliance runway. And the clock has already started ticking.

What Will Subsidiary Regulations Clarify?

For VASPs, the 12-month grace period under the Kenya Virtual Asset Service Providers Act, 2025, is not a pause but an implementation sprint. As subsidiary regulations are being drafted, the next year will determine which companies adapt successfully, which survive with adjustments, and which may exit the market.

The upcoming regulations are expected to define the specific mechanics for achieving full compliance, including:

• • Core capital thresholds that reflect the varying risk profiles of exchanges, custodians, brokers, and other VASPs.
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  • Licensing fees and categories, offering clarity on cost structures for small, medium, and large players.
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  • Standardized application forms and required documentation to streamline licensing and reduce ambiguity.
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  • Eligibility and fit-and-proper tests for directors, senior managers, and controllers.
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  • Continuing compliance and governance obligations, including reporting timelines, audit expectations, and disclosure rules.
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  • Consumer-protection standards, from complaint-handling to transparency requirements.
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  • Risk-management frameworks tailored to the operational realities of custody, trading, token issuance, transfers, and other activities.

These regulations will essentially determine how the Kenya VASP law functions on the ground, from onboarding to oversight.

Why Does This Moment Matter for the Digital Asset Industry?

For operators, this period represents both an opportunity and a stress test.

1. A Chance to Formalize Operations and Build Credibility

Clear rules will help legitimate players differentiate themselves from informal or lightly governed entities. Many VASPs have long sought regulatory clarity to unlock partnerships with banks, payment institutions, and enterprise clients.

2. The Foundation for Market Stability

Capital requirements, fit-and-proper standards, and risk management rules will reduce systemic vulnerabilities, create predictable guardrails, and strengthen user trust; all essential for sustainable growth.

3. A New Era of Competition and Consolidation

Some smaller or under-capitalized entities may struggle to meet new thresholds. Industry consolidation is expected as firms merge, exit, or pivot to niche services. At the same time, compliance-ready players may gain a first-mover advantage.

Industry Concerns as Drafting Begins

Despite optimism, several concerns are circulating within the digital asset economy and community:

• • Cost of compliance: Capital and licensing fee requirements may price out smaller startups.
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  • Possible over-regulation: There is apprehension that overly burdensome rules could stifle innovation or limit the agility that defines virtual-asset markets.
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  • Overlap with existing frameworks: Questions persist around how VASP obligations will interact with payments, AML/CFT, and data-protection regimes.
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  • Timeline uncertainty: Even with the adjustment window, firms need clarity on when final rules will be published to plan their transitions effectively.

These concerns are common during major regulatory shifts; but they also underscore the need for robust engagement between industry players and regulators over the next several months.

Market Outlook: Cautious Optimism, Strategic Positioning Under Strengthening Regulatory Oversight

Despite the uncertainties, the market is cautiously optimistic.

• • Many anticipate greater institutional participation once clear rules on custody, liquidity, and governance emerge.
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  • Exchanges, fintechs, and stablecoin providers expect improved banking relationships, as compliance frameworks reduce perceived risk.
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  • A healthier competitive landscape is expected, with regulated players gaining greater legitimacy and potential access to regional markets.
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  • Most importantly, the industry sees this as the moment Kenya aligns with global crypto-regulatory trends; from MiCA in the EU to stablecoin-specific regimes in the U.S. and Asia.

The next year will be pivotal, and the drafting of the regulations will determine whether Kenya becomes a regional hub for compliant digital-asset innovation or a market slowed by regulatory friction.

What Awaits VASPs After the 12-Month Transition Window?

The grace period ends on 3 November 2026. After that:

• • Operating without a license becomes illegal.
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  • Regulators may impose administrative sanctions, including:
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    • Fines of up to KSh 10 million
    • Operational restrictions
    • Suspension or revocation of licenses
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  •  Unlicensed operations may trigger criminal penalties, including fines up to KSh 25 million and imprisonment of up to five years for individuals.

By 2026, operating without a license will no longer be a business gamble, but a criminal liability. The grace period offers a necessary runway, but the countdown to compliance has firmly begun.

What Comes Next For Kenya’s Digital Asset Economy?

The next 12 months will reset the digital-asset ecosystem as Kenya transitions from ambiguity to clear regulatory architecture. The combination of licensing, prudential rules, governance standards, and consumer-protection frameworks creates the foundation for:

• • Regulated stablecoin settlement
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  • Enterprise-grade digital-asset payments
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  • Blockchain-enabled financial products
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  • Stronger PSP–fintech–bank collaboration

The journey will be demanding, but it accelerates Kenya’s positioning as a future-ready digital-finance hub.

How YoguPay is Preparing for the New Digital Finance Frontier

As Kenya moves into a fully regulated digital-asset environment, one thing is clear: the companies that win are the ones building compliance-ready infrastructure today—not scrambling for alignment tomorrow. At YoguPay, we’ve taken this mandate seriously.

We are actively ensuring that our crypto wallet, treasury, and digital-asset payment infrastructure is aligned with emerging requirements under the VASP Act. We are already incorporating the expected standards around governance, security controls, custody safeguards, liquidity management, and transaction monitoring, so our partners can keep operating confidently as the regulatory landscape evolves.

Our objective is straightforward: to enable African businesses to move value across borders with enterprise-grade safety, transparency, and compliance baked into the platform.

We are doing this because we understand the stakes. Our partners: fintechs, PSPs, exchanges, OTC desks, and enterprise platforms, need infrastructure that meets the bar of tomorrow, not yesterday. They need solutions that are regulator-aligned, integration-ready, and scalable across markets.

And that is exactly what we are building. Contact us or visit www.yogupay.com to unlock your regulated, cross-border payment future.