NAIROBI — Industry players in Kenya's blockchain and fintech sectors have warned that proposed taxes and high licensing requirements under the Finance Bill 2026 and the draft Virtual Asset Service Providers (VASP) Regulations could favour large foreign firms at the expense of local startups.
The concerns emerged during the fourth edition of the Kenya Blockchain and Crypto Conference in Nairobi, where players in the digital payments and virtual assets ecosystem called for balanced regulation that protects consumers without stifling innovation.
Felix Macharia, chief executive of Kotani, said the industry supports regulation but warned against policies that disadvantage local firms in favour of global players.
"In the absence of regulation, there was a lot of crime, there was a lot of scams and issues happening," said Macharia.
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"What we're looking at is balanced regulation between global players and local players."
Macharia cautioned that excessive capital requirements and unclear tax structures could undermine the growth of Kenyan startups entering the virtual assets space.
"If you put requirements like those ones, you are mostly benefiting the global giants," he said.
"The whole issue of tax is something the industry expects, but one that must be well thought through."
Kenya has been moving to formally regulate the cryptocurrency sector following the enactment of the Virtual Asset Service Providers Act in 2025, as authorities seek to tighten oversight of digital assets, curb fraud and improve tax compliance.
The Finance Bill 2026 now proposes stricter reporting requirements that would compel crypto exchanges and wallet providers to share transaction data with the Kenya Revenue Authority (KRA), while draft VASP regulations introduce licensing, capital and compliance requirements for firms operating in the sector.
The proposals would require crypto exchanges, wallet providers and virtual asset firms to undertake stricter Know Your Customer (KYC) checks and comply with new licensing requirements.
The framework also introduces categories for exchanges, wallet providers and payment firms as Kenya moves to formally regulate the sector.
Kevin Kigima of Yogupay warned that proposed VAT on merchant service fees and cross-border payment services could increase transaction costs and make Kenya less competitive as a regional fintech hub.
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"The proposed introduction of VAT into payment service provider and merchant services agreements is the major elephant in the room," said Kigima.
"What you typically find is most businesses will pass this cost through to consumers, which then makes Kenya a significantly more expensive corridor to make payments out."
Kigima cautioned that high licensing fees in the virtual assets sector could lock out smaller technology startups and concentrate the market among well-capitalized multinational firms.
Meanwhile, Sheila Wasua,the event organizer said the industry remains committed to working with regulators to create a business-friendly environment for blockchain companies seeking to enter the Kenyan market.
"We've had very many engaging sessions with regulators, especially around what a friendly business environment looks like in the country," said Wasua.
