Nairobi — Kenya's rapid strides toward formalising its cryptocurrency sector have positioned it as a regulatory trailblazer in Africa.
But industry players now warn that policy uncertainty particularly around taxation, licensing and oversight risks undermining hard-won gains in adoption and innovation.
The country recently enacted a standalone law to govern virtual assets, becoming the first in Africa to do so.
The move was widely hailed as a turning point for a sector that has largely operated in legal grey zones across the continent.
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Yet stakeholders say the promise of the law will only be realised if the subsidiary regulations being drafted by the Central Bank of Kenya (CBK) the Capital Markets Authority (CMA) and the National Treasury provide clarity rather than confusion.
Wale Osideinde, Chief Operating Officer at Bitnob, said Kenya's leadership in passing crypto legislation has made it central to Africa's digital finance conversation.
"Kenya right now is the first African country to have a standalone crypto legislation, and that makes this a core conversation to have in this country."
"With stable coin, you can do instant settlements and a lot of your fees that goes into regular banking payments can be kept for the business to build their business."
Stablecoins digital tokens pegged to fiat currencies are increasingly being used for cross-border trade, remittances and supplier payments.
Globally, trillions of dollars now flow through stablecoin networks annually, reshaping how value moves across borders.
For Kenyan businesses, the appeal is practical: faster settlements, lower transaction costs and less reliance on correspondent banking channels that often route African payments through foreign financial centres.
But while adoption grows, uncertainty over how the rules will ultimately be implemented is creating hesitation among investors and financial institutions.
Taxation and regulatory overlap
Tony Olendo, Chairman of the Virtual Assets Chamber of Commerce and CEO of Viage Labs, said the primary legislation is only the first step.
"Kenya is the first African country that has a single standalone act that is regulating virtual assets or cryptocurrency. But the job is not finished."
"Taxation is at the core of the issue here, because if you actually levy taxes on the industry too early, then you will actually have a problem."
Kenya already introduced a digital asset tax in recent years, a move that sparked debate among startups who argued the ecosystem was still nascent.
Olendo warned that imposing heavy levies before firms reach scale could drive innovation offshore.
He also called for clearer delineation of roles between regulators, noting that overlapping mandates could create compliance bottlenecks.
Without clarity on whether firms fall under the CMA or the Central Bank or both integration with banks and mobile money platforms remains slow.
Strong uptake, fragile confidence
Despite policy friction, crypto usage in Kenya continues to expand.
Edward Ndichu, CEO and Co-Founder of WapiPay, estimates that Kenyans transact roughly $500 million (about Sh6 billion) monthly in stablecoins a figure that underscores the scale of grassroots adoption.
"Today, it is estimated Kenyans are transacting on these stable coins about 500 million US dollars a month."
"We're very excited and proud of the regulator the National Treasury, the Central Bank and the Capital Markets Authority trying to structure a framework for us to be able to operate in this space."
Ndichu said the sector wants regulation but regulation that enables rather than constrains.
"The most important thing is that value is able to move 24/7," he noted, adding that blockchain-based systems can lower costs and improve efficiency compared to traditional rails.
Industry players argue that Kenya's experience with mobile money offers a precedent.
What began as a simple value-transfer system evolved into a sophisticated digital finance ecosystem once trust and regulatory clarity took hold.
Lessons from Nigeria
Across Africa, Nigeria provides a parallel case study.
After initial crackdowns, authorities have shifted toward formalising crypto activity through licensing frameworks while also launching the eNaira, the continent's first central bank digital currency.
Nigeria consistently ranks among the world's highest crypto adoption markets, driven by remittances, inflation hedging and a vibrant youth-led digital economy.
Kenyan stakeholders now demand that digital assets persists regardless of regulatory hesitation.
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The question is whether governments harness that demand or push it into informal channels.
Currently, much of Kenya's crypto market still relies on peer-to-peer trading a workaround born of necessity rather than design.
Clear subsidiary regulations, players argue, would reduce friction, formalise on-ramps and attract institutional capital.
A delicate balance
At stake is more than a niche technology sector.
Proponents see crypto infrastructure as a tool for cheaper cross-border trade, improved financial inclusion and stronger integration into global digital commerce.
Yet the balance between consumer protection, financial stability and innovation remains delicate.
Too little oversight risks fraud and systemic risk.
Too much particularly in the form of premature taxation or regulatory ambiguity could choke off a sector that is already moving hundreds of millions of dollars monthly.
Kenya's legislative milestone has set the stage.
Whether it becomes Africa's crypto benchmark or a cautionary tale may depend on how swiftly and clearly regulators resolve the policy fog now hovering over the industry's next phase.
