Treasury Cuts Capital Requirements for Crypto Firms by Up to 40% After Industry Pressure

Kenya's National Treasury has slashed the minimum capital crypto firms need to operate legally in the country, backing down from thresholds that industry groups warned would have locked most local startups out of the market entirely. The concession, confirmed as the Virtual Asset Service Providers (VASP) Regulations, 2026 were gazetted on July 24, marks the clearest sign yet that sustained lobbying by the Virtual Asset Association of Kenya (VAAK) shaped the final shape of the country's crypto rulebook.

Stablecoin issuers, who faced the steepest bar in the original draft, will now need a minimum paid-up capital of KES 300 million, down from the KES 500 million proposed in March. That is a 40 percent cut on the single most contentious figure in the entire framework.

What Actually Changed

The National Treasury published the draft VASP Regulations on March 17, setting minimum paid-up capital on a sliding scale by activity type: roughly KES 2.5 million for investment advisers up to KES 500 million for stablecoin issuers, with exchanges, wallet providers, brokers, and token-offering platforms slotted in between. Firms holding multiple licenses had to meet each threshold separately rather than pooling capital across activities.

Treasury Cabinet Secretary John Mbadi's gazetted version keeps that tiered structure but compresses it substantially in places:

• Stablecoin issuers: paid-up capital cut from KES 500 million to KES 300 million; liquid capital cut from KES 100 million to KES 60 million (or 100 percent of current liabilities for at least 30 days, whichever is higher).

• Tokenization and initial coin offering platforms: paid-up capital cut from KES 200 million to just KES 10 million for tokenization businesses and KES 20 million for ICO providers, among the steepest reductions in the entire framework.

• Investment advisers: no longer required to hold any paid-up or liquid capital at all, down from a KES 2.5 million draft floor, opening the category to individuals and small firms.

• Wallet providers: held steady at KES 150 million paid-up capital with KES 30 million in liquid capital, unchanged from the draft.

The annual license fee for stablecoin issuers stayed at up to KES 2 million, one of the few figures Treasury left untouched.

Why VAAK Pushed Back So Hard

The capital fight centered on a straightforward argument: a flat KES 500 million paid-up capital requirement, layered on top of insurance, custodian, and audit costs, would have been affordable only to large legacy financial institutions or well-capitalized foreign entrants. Early-to-mid-stage Kenyan fintechs building stablecoin or exchange products had no realistic path to that figure.

VAAK chairman Peter Onyango made the case directly to Treasury during the consultation period, arguing that if Kenya wanted to attract credible global players, its paid-up capital requirements, license fees, and compliance costs all needed to be reconsidered. The association, which represents roughly 50 firms, warned separately that pricing local operators out of the regulated market would not eliminate risk. It would just push activity toward informal, peer-to-peer channels and offshore jurisdictions such as Dubai, South Africa, and Mauritius, where licensing is cheaper and faster.

That argument carried particular weight because of what Kenya is simultaneously trying to fix. The country has been under Financial Action Task Force grey-list monitoring since February 2024 over gaps in its anti-money-laundering controls, and the VASP Act was drafted partly to address that. A licensing regime so expensive that it drives transactions back into unregulated, cash-based, or peer-to-peer markets would work against the very AML oversight the framework exists to deliver. Regulators had less room than they might otherwise have to defend a number that risked achieving the opposite of its purpose.

The Rest of the Framework Stays Largely Intact

Outside the capital figures, the substance of the VASP Regulations has not moved. The Central Bank of Kenya continues to supervise stablecoin issuers and virtual-asset-to-fiat conversion, while the Capital Markets Authority regulates exchanges, token issuance platforms, and tokenization activity — a split that traces back to the VASP Act, which President William Ruto signed into law in October 2025.

Stablecoin issuers still face the framework's most demanding operational rules. They must hold at least 30 percent of customer funds in segregated accounts at commercial banks domiciled in Kenya, with the remaining 70 percent restricted to highly liquid, low-risk instruments such as short-term government securities. Capital obtained through loans or internal revaluations still does not count toward the paid-up capital requirement; only fully paid, unencumbered cash qualifies. Firms licensed for more than one activity, such as running both an exchange and a custodial wallet, still cannot pool capital across categories — each license carries its own separate requirement, now just a smaller one in several cases.

Ownership limits and governance requirements also carry through from the draft. No single shareholder or voting bloc can hold more than a third of an exchange, stablecoin issuer, or wallet provider's shares or voting rights without regulatory approval, a guardrail against concentrated control by individual founders. Licensed firms must maintain functioning governance frameworks, conduct customer due diligence, retain transaction records for at least seven years, and submit to ongoing regulatory reporting and cybersecurity requirements.

With the regulations now gazetted under Legal Notice No. 134, CBK and CMA can begin accepting license applications, something neither regulator could do while the rules remained in draft. The CBK started building internal capacity for this in April, advertising licensing, product-approval, and compliance roles specifically for virtual asset oversight.

Existing operators face a transitional deadline of November 4, 2026, to bring their businesses into compliance or exit the market. For a sector processing an estimated $19 billion in crypto inflows through Kenya between mid-2024 and mid-2025 — placing the country second in East Africa by transaction value — the capital cut widens the pool of firms that can plausibly clear that deadline while staying onshore. Whether it's enough to keep mid-sized Kenyan fintechs from relocating to friendlier jurisdictions will become clear only once licensing actually opens and firms start filing.