REGULATION | The Kenya Government to Revise the Kenya VASP Bill Following Public Uproar Over Watered Down AML/CFT Requirements and Conflict of Interest Concerns

Concerns around the bill started to emerge when one digital assets lawyer raised alarm over serious governance issues around the proposed VARA regulatory body.

CryptoGuru··5 min read

Following a week of public uproar over the parliamentary proceedings of the upcoming Virtual Assets Providers Bill, 20205, and the proposed regulatory body by the name, the Kenya Virtual Assets Regulatory Authority (VARA), the government has apparently withdrawn the suggested amendments to the bill for a review.

According to reliable sources, the bill was apparently watered down to the point that it needed a review by the relevant authorities before it can be brought back to the parliament floor for ascension.

 

A consultant close to the process told BitKE:

” The VASP bill has been parked until end of the month. The Government wants amendments that could water down controls and in particular AML/CFT requirements revised.

Issues of conflict of interest will also be reviewed.”

 

The above direction will be welcomed by the public, and to a larger extent, the crypto ecosystem of well-meaning stakeholders and players who would like to see regulations that offer a level playing field for players.

 

Timeline of Events

In June 2025,  the Kenya National Assembly (Kenya Parliament) took a significant step toward regulating the country’s fast-growing crypto ecosystem with the release of a comprehensive report on the Virtual Asset Service Providers (VASP) Bill, 2025 (Bill No. 15 of 2025). One of the most significant reforms in the report was the creation of a joint Virtual Assets Regulatory Authority (VARA):


The report, compiled by the Departmental Committee on Finance and National Planning, outlined extensive stakeholder feedback and critical amendments that bring the Bill in line with global best practices while tailoring it to Kenya’s unique regulatory and innovation landscape.

While the creation of a regulatory body seemed like a good idea, concerns around this started to emerge when one digital assets lawyer raised alarm over serious governance issues around the proposed VARA regulatory body.

In an op-ed, lawyer Muthoni Njogu highlighted key issues and concerns that would have resulted in the body being unable to deliver on its mandate.


The 3 critical risks she highlighted include:

1.) A serious lack of guaranteed technical expertise. This is the biggest issue. The vague requirement for experience in “law, finance or technology” is simply not good enough.

2.)  A high risk of political influence. Giving the President and the Cabinet Secretary all the appointment power without a more transparent, merit-based process is asking for trouble.

3.) A built-in conflict of interest. Giving a full voting seat to a representative of the “Virtual Assets Chamber of Commerce” is a fundamental error that invites regulatory capture.

 

According to the lawyer, ‘getting the governance right from the start isn’t just important, its everything.’

 

Around the same time that the op-ed was written, a local financial outlet published an article exposing a collusion between a leading global exchange with a heavy presence in Kenya and an advocacy group which was heavily involved in offering insights and recommendations in the draft bill. According to the post, the advocacy group, which initially enjoyed the support of the crypto community, had been compromised and unable to execute on its mandate resulting in a conflict of interests.

As parliamentary proceedings progressed, it became apparent that some of the parliamentarians were being used to peddle inconsistent and unverified information in order to push the already compromised bill.

As the third bill reading came to the floor, it was increasingly becoming clear that vested interests were at play. The last iteration, which apparently spooked the regulators with a ‘control’ that would require all fiat-to-crypto and crypto-to-fiat activities be ‘conducted through a licensed Kenya Shilling-backed stablecoin issuer’ was added.

The addition of this last stablecoin requirement was both nefariously strategic and calculated considering the Bill was in its last reading before proceeding to the President of Kenya for signing into law.

According to one ecosystem player:

“To sneak this into permanent law is pure ecosystem capture by unknown corporate actors that goes against the spirit of Web3 in Kenya.”

 

As these developments unfolded, a visit to Kenya by the President of the Africa Development Bank (AfDB) and his analysis of the current economic crisis in the country further re-affirmed the challenges facing Kenya’s institutions.

See also


According to AfDB President, Kinwumi Adesina:

“What is holding Kenya back is not a lack of resources or capacity,” he said. “It is rent-seeking, state capture, and mismanagement of public finances.”

 

Adesina pointed to pervasive graft in Kenya’s public sector, noting that while the country has strong institutions and abundant potential, these are being undermined by systemic corruption and rent-seeking behavior.

Adesina also highlighted the need for transparency and good governance, adding that addressing state capture is not only essential for Kenya’s economy but also for restoring public trust and attracting long-term capital.


The recent developments in the Kenya crypto regulatory space speaks volumes about regulatory advocacy in the country and whether upcoming regulation will help improve the economic situation currently grappling the country or its an opportunity for for rent-seeking players.


As the digital lawyer warns in her op-ed:

Without rules, the board [VARA] can become a place for political favors rather than effective oversight. It shows exactly the risk Kenya is running.”

 

 

 

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