The National Treasury has scrapped a proposal that would have capped ownership in cryptocurrency exchanges, wallet providers and stablecoin issuers at one-third, easing a restriction that experts had warned would discourage investment in Kenya's virtual assets sector.

The provisions have been dropped in the final Virtual Asset Service Providers (VASP) Regulations, 2026, published by Treasury Cabinet Secretary John Mbadi.

It would have barred any individual or entity from controlling more than 33.3 percent of the issued share capital, voting rights, board representation, dividends or shareholder loan interests in a virtual asset exchange, stablecoin issuer or wallet provider.

Scrapping the proposal now opens the door for founders, venture capital firms and strategic investors to take controlling stakes in crypto businesses, bringing the governance framework closer to conventional corporate ownership structures.

“The draft Regulations had imposed a hard cap prohibiting any person from controlling more than 33 percent of issued share capital, voting rights, directorships, dividends, or shareholder-loan interest in a virtual asset exchange, stablecoin issuer or wallet provider,” experts at the law firm Bowmans say in a new analysis.

“The cap also prohibited any person from appointing more than one-third of the board, subject to a diversified corporate-shareholder exception. This entire cap has been deleted from the final regulations.”

Read: How new Treasury rules on stablecoin will affect players

The Treasury has also relaxed rules governing changes in ownership after licensing.

Under the draft regulations, every acquisition, transfer or disposal of shares in a licensed virtual asset business required regulatory approval, regardless of the size of the transaction.

The final regulations instead introduce a graduated approach, where transactions involving up to 10 percent of a firm's shares or ownership interests will only require prior written notification to the regulator. Deals exceeding the 10 percent threshold, meanwhile, will require prior approval.

This gives crypto firms more flexibility for fundraising and corporate restructuring while maintaining regulatory oversight of significant ownership changes.

At the same time, virtual asset firms already operating in Kenya will not receive automatic recognition under the new regulatory framework, forcing them to comply with licensing requirements afresh.

"All pre-existing operators have no 'grandfathering' mechanism and must meet the full licensing and compliance requirements from commencement," Bowmans says.

Businesses have until November 2026 to comply with the licensing and regulatory requirements before the new regime takes effect.

In the final rules, Treasury also lowered capital requirements and licence fees across several categories after industry pushback.

Virtual asset exchanges will now pay an initial licence fee of Sh1 million, down from Sh2 million proposed in the draft regulations, while annual renewal fees have been reduced to Sh500,000 or 0.5 percent of the previous year's gross revenue, whichever is higher.

The regulations also reduce paid-up capital requirements across most licence categories; crypto operators are required to have a minimum paid-up capital of up to Sh300 million, down from the earlier proposed Sh500 million.

Similarly, the Treasury scrapped paid-up capital requirements for virtual asset investment advisers and allowed firms to hold multiple virtual asset licences under one entity.

The regulations operationalise the Virtual Asset Service Providers Act, 2025, which took effect in November 2025.

The Act mandates the Central Bank of Kenya and the Capital Markets Authority jointly license, supervise, and regulate the virtual asset providers.

It is Kenya's first comprehensive framework for cryptocurrency exchanges, wallet providers, brokers, stablecoin issuers, tokenisation platforms and other virtual asset businesses.

The legislation was introduced amid Kenya's rising use of virtual assets in recent years, mostly to pay for imports, wire money home from abroad, and repatriate earnings among multinational firms.

However, the digital currencies have been exploited for money laundering, terrorism financing and crime due to their pseudonymity and ability to be transferred across borders without monitoring by traditional financial institutions and law enforcement agencies.

dmusau@ke.nationmedia.com