Kenyan lawmakers have raised strong objections to proposed stablecoin reserve requirements in draft regulations, warning that strict local holding rules could hinder innovation, deter foreign investment, and undermine Kenya’s ambition to become a regional fintech leader. The National Assembly’s Committee on Delegated Legislation has flagged concerns over provisions requiring stablecoin issuers to maintain at least 30% of reserves in segregated accounts at Kenyan commercial banks, as part of the implementation of the Virtual Asset Service Providers framework.
The challenge comes as Kenya advances its comprehensive crypto regulatory regime following the passage of the Virtual Asset Service Providers Act in 2025. The draft rules, issued by the National Treasury, aim to provide clarity for stablecoins, exchanges, and related activities under the oversight of the Central Bank of Kenya and the Capital Markets Authority.
Key Points of Contention
Legislators, including members of the Committee on Delegated Legislation, question the rationale and potential impact of the 30% local reserve mandate. They argue it may create regulatory duplication, increase operational costs for international issuers, and discourage entry into the Kenyan market. Concerns focus on whether such requirements genuinely enhance investor protection or risk pushing activity to more flexible jurisdictions.
The proposed framework also outlines eligible reserve assets, including cash, central bank deposits, short-term government securities, and other high-quality liquid instruments. While designed to ensure stability, full redeemability, and protection against runs, critics say the localisation elements could limit scalability in a country with a vibrant crypto user base and significant stablecoin transaction volumes.
Background and Regulatory Context
Kenya has rapidly evolved from a cautious stance on digital assets to proactive regulation. The 2025 Act established licensing regimes, with the Central Bank handling stablecoin issuance and the Capital Markets Authority overseeing trading platforms. Ongoing consultations and draft regulations seek to balance consumer protection, anti-money laundering compliance, and financial stability with innovation.
Lawmakers are calling for broader industry consultation to refine the rules before finalisation. This reflects Kenya’s strategic goal of harnessing crypto and fintech for economic growth, remittances, and financial inclusion while mitigating risks.
Broader Implications
The outcome of this debate will significantly shape Kenya’s digital asset ecosystem. Supportive, proportionate rules could attract global players, boost local innovation, and position Kenya competitively in Africa’s fintech landscape. Overly restrictive measures, however, risk slowing adoption and capital flows at a time when stablecoins are increasingly used for payments and cross-border transfers.
Industry stakeholders emphasise the need for rules aligned with international standards yet tailored to Kenya’s market realities. As public comments and parliamentary scrutiny continue, the focus remains on creating a framework that fosters trust, safeguards users, and supports technological advancement.
This development highlights the delicate balance regulators face worldwide in embracing digital finance while addressing stability and integrity concerns. Kenya’s approach will be closely watched across the continent as more nations develop their own crypto policies. Further updates are expected as the National Treasury and regulators respond to legislative feedback.