Kenya is drawing a tight circle around who can issue stablecoins in the country and how those digital currencies must be built.
The National Treasury’s draft Virtual Asset Service Providers Regulations, published in March and now out for public comment until Friday, lay out reserve rules, capital thresholds, and disclosure standards that together try to pull stablecoin value, data, and control firmly onshore.
Under the proposed regulations, any firm issuing a stablecoin to the public in Kenya must hold local fiat‑backed reserves at all times in high‑quality liquid assets, such as cash or deposits with commercial banks or the central bank. Those reserves must be kept separate from the issuer’s own funds, free from third‑party claims, and always available for redemption.
At least 30% of customer funds backing a stablecoin must sit in segregated accounts at commercial banks domiciled in Kenya, while the rest is limited to high‑quality liquid assets like cash or government securities with maturities of 90 days or less, anchoring a meaningful slice of stablecoin float in the domestic banking system.
Tokens must be redeemable at par value on demand, and issuers are banned from paying interest or yield on stablecoins, including “indirect yield routed through other licenced virtual asset businesses.” It is a direct shot at yield‑bearing products that have powered much of global stablecoin adoption.
Kenya’s draft rules are built to encourage well‑capitalised, heavily scrutinised stablecoin issuers whose fully backed, segregated reserves must stay ring‑fenced and available so holders can redeem at par and have a claim against the issuer if things go wrong.
Yet, high capital and compliance demands risk pushing smaller issuers—and much of the informal mix of digital tokens that circulate in Kenya today—out of the licenced market altogether, narrowing the range of digital tokens that users can access through regulated channels.
Stablecoin issuers “in or from Kenya” would need at least KES 500 million ($3.85 million) in paid‑up capital, and core or liquid capital of KES 100 million ($773,700) or 100% of current liabilities for at least 30 days, whichever is higher.
The draft also proposes recurring proof‑of‑reserves checks, annual independent reviews, and robust internal controls around custody and operations, alongside the licencing and renewal fees that apply across the sector.
Boards of directors would be held accountable for the accuracy of disclosures, and issuers would have to file updates with regulators and include clear warnings that these products are not covered by investor compensation schemes.
The draft also establishes a “Coordination Committee,” chaired by the National Treasury, with members from the Central Bank of Kenya (CBK); the Capital Markets Authority (CMA); the Financial Reporting Centre (FRC); the Asset Recovery Agency (ARA); the Directorate of Criminal Investigations (DCI); the National Intelligence Service (NIS); the Nairobi International Financial Centre (NIFC); the National Computer and Cybercrimes Coordination Committee (NC4); the Communications Authority of Kenya (CAK); the National Counter Terrorism Centre (NCTC); the Office of the Attorney General; and any other agency the Cabinet Secretary may designate.
The 13-member committee’s mandate will be to coordinate supervision of virtual asset service providers, share supervisory and enforcement information, harmonise regulatory approaches, support joint inspections and risk assessments, and issue joint advisories where issues cut across multiple agencies. That structure means decisions about where reserves sit, which custodians are acceptable, when an issuer is too risky, or whether a coin should be halted or delisted are unlikely to rest with a single authority.
Kenya’s approach mirrors moves in the United States and the European Union (EU) to tighten standards for stablecoins without banning them.
In the US, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, signed in July 2025, requires permitted payment stablecoin issuers to hold 100% reserves in specified liquid assets—cash, deposits at regulated institutions, short‑term Treasuries, and certain money market funds—and to make regular public disclosures on how those reserves are composed.
In the EU, the Markets in Crypto-Assets (MiCA) rules require smaller stablecoins to hold at least 30% of their reserves at commercial banks and “significant” stablecoins 60% or more, with the remainder in other high‑quality liquid assets. Kenya’s proposal echoes those trends on full backing and bank deposits but goes further in two ways: it ties a fixed slice of reserves specifically to Kenyan banks and assets, and it bans yield outright, where the US and EU frameworks focus more on reserve safety and disclosures than on how much return a holder can earn.
The yield ban and licencing model narrow what licenced virtual asset companies in Kenya can do with yield‑bearing stablecoins. Since issuers are barred from paying interest on these coins, including indirectly through other licenced virtual asset businesses, a Kenyan‑regulated platform is unlikely to launch its own yield‑bearing token or wrap staking returns into a local product.
The Kenyan Stablecoin Anchor
Simulate the reserve requirements under Kenya’s 2026 draft VASP regulations.
Current Kenya stablecoin supply is approx. KES 18.8M ($145k).
The Barrier to Entry
Fixed Paid-up Capital Required:
This is ~26x the size of Kenya’s entire current stablecoin market ($3.85M).
Based on Kenya’s draft VASP Regulations 2026. $1 ≈ KES 130. Calculations assume a 1:1 local currency peg as mandated by the Treasury draft.
Stablecoins now sit at the heart of digital markets, and the numbers show how concentrated that market has become. As of March 2026, global stablecoin supply stood at $320.1 billion, with US dollar‑linked coins making up 99.76% of that supply, according to research firm Artemis.
By comparison, African currencies barely register stablecoin supply activity, accounting for a combined $665,300 in value, well below 1%.
Within that tiny sliver, South Africa leads with roughly $426,400 in rand‑linked coins such as ZARSC and ZARP, followed by Kenya with around $145,300 (including KESm), Nigeria with about $67,800 (cNGN and NGNm), and Ghana with roughly $25,800 via the cedi‑based stablecoin.
On‑chain stablecoin transactions in Africa fell from 657,900 in Q1 2025 to about 391,000 in Q1 2026, a 41% year‑on‑year drop that suggests trading and payment velocity is cooling even as regulators tighten the rules, according to Artemis data.
Yield‑bearing stablecoins, which attract traders and long‑term holders looking to earn more than they would on other assets, have a market capitalisation of $303 billion and represent 9% of the stablecoin market, according to research firm Messari.
Regular, a France-based investment platform that helps corporations to invest in digital assets, says realistic stablecoin yields typically sit between 2% and 6% a year; that rate could climb to 10% during peak seasons or during high borrowing demand periods. Riskier stablecoins can offer up to 12% annual percentage yield (APY) to incentivise usage.
For a chunk of users, that steady income is the main reason to hold stablecoins rather than keep money in cash or a basic bank account.
Kenya is making a deliberate choice: by forcing at least 30% of reserves into commercial banks and the rest into tightly defined high‑quality liquid assets, the draft brings stablecoin money into clearer view for local lenders and the state. By banning yield and insisting on fully backed, instantly redeemable coins, it tries to keep holders away from losses tied to how issuers manage their reserve portfolios.
The move aligns with global recommendations from the Financial Action Task Force (FATF), as Kenya tightens virtual asset supervision. It also signals its concern about the risks of heavy reliance on foreign currency-backed stablecoins for payments and savings.
Yet, the design, combined with the required minimum capital requirement and ongoing audit and reporting costs, also narrows the field to well‑capitalised crypto firms, while making it harder for smaller teams experimenting with local‑currency tokens to justify full onshore, fully regulated structures for a market that is still measured in hundreds of thousands of dollars of supply.
Kenya’s draft rules pose a dilemma over stablecoins: how much experimentation it is willing to give up in return for more safety and control. If they pass as proposed, the country is likely to have a small group of domestically anchored, transparently backed coins under close committee oversight, but far less room for the high‑yield, higher‑risk tokens that currently populate the market.
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