Kenya’s recent celebrations over its recent VASP bill might have been short-lived.

After the combined participation of top-tier exchanges and sit-downs to educate members of parliament, recent events have thrown the integrity of the bill into question.

In Brief

• The VASP Bill was withdrawn after experts flagged governance flaws, potential regulatory capture, and political interference in Kenya’s digital asset framework.

• A last-minute stablecoin clause raised fears of monopoly control over fiat on/off ramps, highlighting risks of ecosystem capture.

• Future legislation must prioritize technical expertise, transparency, and community-led oversight to prevent crypto suppression across East Africa.

This sudden red flag was raised, citing various issues surrounding the bill’s governance structures and potential for undue influence.

As a result, the Kenyan government has withdrawn the bill, citing its desire to “water down” controls.

The development of virtual asset laws is no easy feat. However, this sudden repeal does raise some questions.

Who’s pulling the strings behind the bill? Will corruption infiltrate Kenya’s cryptocurrency ecosystem? Who added the addition to the bill, rendering it unusable?

VASP Bill Withdrawn Amid Governance Concerns

In East Africa, Kenya dominates the blockchain industry, and its recent attempt to regulate digital assets solidifies this position.

However, recent developments have shown just how cumbersome it is to apply laws to a lawless entity.

According to reliable sources, the VASP bill underwent several amendments that ultimately worked against its effectiveness.

“The VASP bill has been parked until the end of the month. The government wants amendments that could water down controls, particularly AML/CFT requirements. Issues of conflict of interest will also be reviewed.”

A consultant close to the processes indicated.

With the bill taking one step back, the government still encourages public participation, opening its doors to its growing crypto community.

This move allows participation from a demographic that understands the inner workings of digital assets, ensuring the development of fair and genuine oversight.

From Ambition to Alarm, What Started as Adoption Becomes Manipulation

The VASP bill kickstarted with much anticipation and zeal.

In June 2025, the Kenya National Assembly released a comprehensive report on the Virtual Assets Service Providers Bill 2025 (Bill No. 15 of 2025).

To truly implement this new law, the reports proposed the establishment of the region’s Virtual Assets Regulatory Authority (VARA).

However, it’s due to this key piece that the reports were subjected to numerous reforms.

The Departmental Committee on Finance and National Planning, having incorporated extensive stakeholder feedback, positioned the bill to align with global standards while still accounting for Kenya’s unique regulatory ecosystem.

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The establishment of the Kenya VARA body would streamline most of its virtual asset laws. However, Africa’s governance issues soon became apparent.

The question of who will be in charge of a regulatory body responsible for streamlining Kenya’s $100.7 million market highlights a deep-seated issue in the country.

Digital assets lawyer Muthoni Njogu published a damning op-ed highlighting critical governance flaws in the proposed VARA.

Njogu pinpointed three fundamental risks:

• Lack of Guaranteed Expertise: The vague requirement for board members to have experience merely in “law, finance or technology” was deemed wholly insufficient for overseeing the complex crypto sector. Technical depth was missing.
• High Risk of Political Influence: Concentrating appointment power solely with the President and the Cabinet Secretary, without a transparent, merit-based process, opened the door for politicization.
• Built-in Conflict of Interest: Granting a full voting seat on the regulatory board to a representative of the “Virtual Assets Chamber of Commerce” was flagged as a recipe for regulatory capture – where the industry regulates itself. As Njogu starkly warned, “Getting the governance right from the start isn’t just important, it is everything.”

Simultaneously, investigative reports surfaced alleging collusion between a major global crypto exchange operation heavily in Kenya and an advocacy group deeply involved in shaping the draft bill.

What started as a community soon went sour, with it falling under suspicion of being compromised, raising serious questions about the integrity of the consultation process and introducing a clear conflict of interest.

The group was split, with observers noting inconsistencies and unverified information being presented by some legislators, raising questions about the genuine interests of certain groups.

Manipulation found its way to the heart of what many crypto communities view as a step toward adoption.

The Controversial Stablecoin Mandate: A Calculated Move?

In what critics label as a nefariously strategic insertion during the final reading before the presidential assent, a clause mandating stablecoin licensing requirements appeared.

This latest addition would have required all conversions(fiat-to-crypto and crypto-to-fiat) to be conducted exclusively through a licensed Kenya Shilling-backed stablecoin issuer.

There’s no way to look at it; the timing, the suggestion, it was all a deliberate attempt to embed a highly specific and restrictive control benefiting unknown actors.

CHECK OUT: Kenya Calls for Your Voice on Crypto Laws – Have Your Say!

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

Lamented one industry player.

This specific stablecoin requirement crystallized fears of regulatory capture, moving beyond merely restrictive governance to potentially locking in a monopoly or oligopoly for fiat on/off ramps.

Kinwumi Adesina, AfDB President event stated:

“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.”

Systemic corruption and a pervasive mindset have consistently undermined Kenya’s growth, and this plague has now infiltrated its crypto community.

The Path Forward: Governance First

Kenyan crypto laws impact the entire East African ecosystem, with Tanzania and Uganda already close behind.

The withdrawal of the VASP bill was necessary, as the draft had shifted from seeking adoption to highlighting the region’s inherent governance issues.

Establishing effective digital asset regulation requires increased attention to protect consumers while providing clarity and mitigating factors such as money laundering.

Many questions still linger over the transition of the bill, and its reintroduction must address the core conflicts of interest, ensure genuine technical expertise on the regulatory board, and eliminate avenues for political manipulation or industry capture.

In other cases, the pause might appear as a delay to innovation. Still, in this case, it prevents the implementation of a bill that would effectively eliminate the region’s crypto industry.