Virtual assets providers have clashed with the National Treasury over a proposal to keep 30 percent of funds raised from stablecoin issuances in local commercial banks.
The firms want the requirement struck out for foreign-issued stablecoins, which are likely to face a similar rule in their host countries (country of issuance).
The firms have found support from the National Assembly Committee on Delegated Legislation, which sees the rule as a hurdle discouraging international operators from entering the Kenyan market.
Stablecoins are virtual assets designed to or that aim to have their value fixed or pegged relative to one or more reserve assets, including fiat currency, commodities, or other virtual assets, for the purpose of maintaining a stable value of the stablecoin.
The assets are seen as complementary to fiat, delivering liquidity in markets that might have difficulties in obtaining hard currency such as US dollars.
The local virtual assets providers want amendments to spare foreign-issued stablecoins from the rule to avoid regulatory duplication.
‘The best approach will be for the National Treasury to refine the portion of the regulations, providing for the differentiation between local issuers of stablecoins and foreign issuers,’ said Allan Kakai, director at the Virtual Assets Chamber of Commerce.
‘The focus of the requirement should be on Kenya Shilling-based stablecoins and not the localisation of foreign-issued stablecoins.’
The Virtual Asset Service Providers Regulations of 2026, which are currently under scrutiny by Parliament, seek to effect the Virtual Asset Service Providers Act, adopted last year, and which provides a legal base for the operations of players in the sector.
The rule requires that at least 30 percent of funds received by an exchange for stablecoins be held in accounts at commercial banks in Kenya.
Issuers of stablecoins usually receive cash/fiat money in the place of coins issued, with the value of both holding at an equilibrium where one stablecoin holds the same value as one unit of the fiat.
Kenya will allow virtual asset providers to undertake initial coin offers for stablecoins, in a move that mirrors company initial public offerings (IPOs).
The issuances must have approval from the relevant regulatory authority, while the provider shall initially publish a white paper containing information including the rights and obligations attached to the stablecoin, underlying technology, stabilisation mechanism and arrangements for custody and management of reserve assets.
The virtual assets providers have found support from the Committee on Delegated Legislation, which has questioned some of the provisions contained in the regulations, highlighting a disconnect from global industry practices and the technical realities of digital assets.
‘If we make laws that are in one hole here and have no relation with the global practice, then we will be a laughingstock to the entire world,’ said Samuel Chepkonga, the chairperson of the Committee on Delegated Legislation.
The regulations are of interest to both local and foreign firms in the virtual assets industry as Kenya sees high interest from players looking to enter the market.
More than 50 digital currency firms, including the world’s largest cryptocurrency exchange, Binance, are in talks to set up regional headquarters in Nairobi, attracted by growing adoption and tax incentives.
Stablecoins are a form of cryptocurrency, described as a digital or virtual form of currency, secured by cryptography.
Kenya is one of Africa’s largest crypto markets, with an estimated 733,300 individuals in the country owning digital assets, as per data from crypto research firm Chainalysis, ranking the country third in Africa in crypto adoption after Nigeria and South Africa.
Virtual assets providers will be required to abide by high capital and liquidity requirements to operate in Kenya as the National Treasury eyes stability for the emerging asset class.
An issuer of stablecoins and any other type of cryptocurrency is required to have Sh200 million in paid-up capital and Sh40 million in liquid capital or eight percent of its total liabilities.
The new regulations will allow for various virtual asset services including wallet providers, virtual asset exchanges, payment processors, brokers, advisers, managers, issuance platforms and tokenisation.
The Committee on Delegated Regulation told this publication that it has held a pre-publication scrutiny of its report on the regulations.