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MPs agree to cut fines, penalties for cryptocurrency companies
In 2015 and 2022, CBK issued cautionary notices to financial institutions, warning against engaging with cryptocurrencies and stating that they are not recognised as legal tender.
Investors in the cryptocurrency market have scored big after successfully lobbying a House team to reduce the Sh10 million fine that was set to be imposed if MPs approve the Virtual Asset Service Providers Bill, 2025.
The State-backed Bill had proposed to impose fines of up to Sh10 million per infraction and prison time of up to five years for violators.
The National Assembly’s Finance and Planning committee has however resolved to ‘harmonise’ the offenses and penalties when the Bill undergoes clause-by-clause scrutiny in the House.
‘‘The committee resolved to harmonise the offenses and penalties,’’ Kuria Kimani, who chairs the committee said in a report on consideration of the Bill.
The Virtual Asset Chamber (VAC) and Yellow Card had told the committee that the fines were excessively punitive. They proposed they be reduced to align with penalties for similar infractions in other financial sectors.
The Asset Recovery Authority (ARA) proposed the addition of a new criminal offence for virtual asset service providers and their directors if they fail to uphold high standards of integrity and accountability.
It argued that they play a critical role and should be held accountable for any illegality they may perpetrate in the conduct of their business.
The ARA wanted Section 41 of the Bill amended to add penalties ranging from Sh1 million for individuals to Sh7 million for a company.
‘‘This amendment will ensure the enforcement of appropriate punitive measures while also taking into account the needs of the start-up ecosystem and supporting the growth of the virtual assets industry,’’ ARA said in submissions to the committee.
‘‘Penalties can be scaled progressively as the industry matures, aligning with both global standards and national regulatory frameworks, including other Fintech-related laws.’’
The Virtual Asset Service Providers Bill, 2025 establishes virtual assets service providers and issuers of initial virtual asset offerings in Kenya.
It also provides mechanisms for licensing of virtual asset service providers, mechanisms for approval of issuance of initial virtual asset offerings, and regulates any other auxiliary or connected matter to virtual assets.
The Bill defines a virtual asset as a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes and does not include a digital representation of fiat currencies, e-money, securities, and other financial assets.
Virtual assets are traded or transferred in the digital sphere often using Blockchain or other Distributed Ledger Technologies (DLT).
They can be used as a medium of exchange, a unit of account, a store of value, or even for investment purposes, with specific digital ecosystems under cross-border financial systems, depending on their structure and application.
The Bill outlines enforcement measures for any contraventions of its provisions, including clearly defined fines. It requires any person or entity seeking to provide virtual asset services to apply for a licence from the relevant authority, which could be the Capital Markets Authority, the Central Bank of Kenya, or the proposed new body, the Virtual Assets Regulatory Authority.
While initiating debate on the second reading of the Bill, Mr Kimani said Kenya is ranked third in Africa in on-chain weighted transactions volume.
‘‘In the last one year, Kenya traded $2 billion (Sh246.46billion) in decentralised protocols, liquidity aggression, and synthetic platforms,’’ he said.
‘‘Kenya has a potential in the virtual assets space to generate at least $1 billion (Sh129.23billion) in terms of foreign direct investment."
The Molo MP said the passage of the Bill has the potential to create, at least, 25,000 jobs in Kenya in the next year.
‘‘We look forward to the new Blockchain technology and tokenisation being used to solve the challenge of budgetary allocation in our country,’’ he said.
‘‘The Controller of Budget estimates that we have approximately Sh550 billion worth of pending bills. I look forward to when this can be tokenised so that we can have people across Kenya and around the globe contributing to this space without constraining the exchequer to be given the limited fiscal space we have in our budget.’’
Mr Kimani said Kenya has witnessed a remarkable rise in cryptocurrency adoption, with over 10 million citizens now holding one form of digital asset or another.
In 2015 and 2022, the Central Bank of Kenya issued cautionary notices to financial institutions, warning against engaging with cryptocurrencies and stating that they are not recognised as legal tender.
Thousands of Kenyans in 2023 lost millions of shillings when the cryptocurrency platform Bitstream Circle collapsed. It had promised high returns and operated without any regulatory oversight, yet it was not licensed or monitored by any Kenyan authority.
