The International Monetary Fund has advised Kenya to modify its virtual asset regulations by allowing foreign-denominated stablecoin issuers to keep reserve assets abroad and by reassessing the fixed paid-up capital thresholds for crypto businesses.
The Fund proposes that stablecoin providers such as Tether’s USDT and Circle’s USDC be permitted to hold backing assets in their home jurisdictions or with foreign custodians, subject to strict conditions on fund transfers and regulatory oversight, and that the use of these tokens by regulated financial institutions in Kenya be limited. “Allow foreign-denominated stablecoins to keep reserves abroad but limit the way stablecoins can be used in the local market (i.e. limiting the use of these stablecoins by regulated financial institutions), or that reserves can be held in foreign custodians subject to strict conditions of transfer and oversight,” the lender says.
Under the Virtual Asset Service Providers (VASP) Regulations issued in July 2026, cryptocurrency exchanges must maintain a minimum paid-up capital of KSh100 million and stablecoin issuers a minimum of KSh300 million. The IMF says the static thresholds could be too high for smaller operators and recommends a proportionate approach that reflects the size, scale and complexity of each entity’s activities. “Ensure there is a proportionate approach to regulating crypto entities in Kenya in line with the scale and complexity of their activities. Currently, capital requirements are static,” the IMF says.
The recommendation follows concerns from local crypto founders that the capital requirements may force some businesses to look at alternative jurisdictions such as South Africa or Mauritius. The VASP Act and accompanying regulations establish licensing and supervisory rules for exchanges, stablecoin issuers and other digital-asset intermediaries.
Crypto activity in Kenya has continued to expand, with users transferring KSh740 billion worth of digital assets in the year to June 2026, a 38 per cent rise from KSh505 billion in the previous period. The growth has moved Kenya to the position of Africa’s third-largest cryptocurrency economy after South Africa and Nigeria.
The IMF also highlighted the need for Kenya to implement the Financial Action Task Force’s Travel Rule and to raise public awareness of the protections offered by the VASP framework, which it says could encourage users to transact through locally licensed issuers.
