Kenya Bans Stablecoin Interest as New Crypto Rules Take Effect

Key Takeaways:

• Kenya has officially gazetted its Virtual Asset Service Providers (VASP) Regulations, turning last year’s legislation into enforceable rules.
• The regulations prohibit stablecoin issuers from paying interest while introducing one of Africa’s most comprehensive licensing frameworks.
• Existing crypto businesses now have until 4 November 2026 to obtain licences or risk fines and criminal penalties.

Kenya gazetted its Virtual Asset Service Providers Regulations on Friday, July 24, 2026. The rules are 116 pages long and cover almost every part of the crypto industry, including exchanges, wallets, stablecoins, tokenized assets, and initial coin offerings (ICO). 

One line stands out. 

Stablecoin issuers are now banned from paying interest to holders.

What Kenya Actually Changed

The regulations, published under Legal Notice No. 134 in Kenya Gazette Supplement No. 185, bring the Virtual Asset Service Providers Act into force. President William Ruto signed that Act in October 2025. It took effect on November 4, 2025, but sat without an enforcement mechanism for eight months while the Treasury drafted the detailed rules. Those rules are now final.

Oversight is split two ways; the Central Bank of Kenya supervises stablecoin issuers and any service converting virtual assets to cash. The Capital Markets Authority supervises exchanges, token platforms, and initial coin offerings. Existing operators have until November 4, 2026, to get licensed. As of publication, no company holds a license under the new Act.

Why the Interest Ban Is the Real Story

Most coverage of this framework leads with licensing. The more revealing rule is the ban on stablecoin interest.

A stablecoin is a crypto token built to hold a steady value, usually by tracking the US dollar. Some issuers pay holders interest for keeping funds in the token, similar to a savings account. Kenya just closed that door.

The regulation is a definition, not just a restriction. Kenya is telling issuers a stablecoin is allowed to be a payment instrument, not an investment product. 

Money you spend, not money you grow.

Why Regulators Don’t Want Stablecoins Competing With Banks

An interest-bearing stablecoin pulls deposits out of the banking system. If a token pays more than a savings account, and moves just as easily, money migrates to it. Commercial banks lose a funding source, and central banks lose visibility into where money sits and how fast it moves.

Kenya isn’t alone in worrying about this. The IMF also recently cautioned Nigeria on the growing use of stablecoins in the country and the potential impact on its monetary policy. US lawmakers fought over the same question while drafting the GENIUS Act, the federal law setting rules for dollar-backed stablecoins. Banks lobbied hard against allowing stablecoin yield, for the same reason: deposit flight.

Stablecoins Got Too Big to Regulate Loosely

Kenya is writing rules for a sizable market. Chainalysis data puts Kenya’s crypto inflows at roughly $19 billion between July 2024 and June 2025, making it one of East Africa’s largest crypto markets. Stablecoins account for a large share of that.

Yellow Card found that stablecoins, mostly USD-pegged, accounted for 43% of sub-Saharan Africa’s total cryptocurrency transactions in 2024. They’re used for remittances, supplier payments, and cross-border trade.

The Reserve Rules: What Backs a Kenyan Stablecoin

Under the new framework, stablecoin issuers must hold at least 30% of customer funds in segregated accounts at Kenyan banks. The remaining 70% must sit in liquid, low-risk assets such as cash or short-term government securities, inside the country.

Issuers also need a published white paper, an independent audit, ongoing reporting to the CBK, and a demonstrated ability to redeem tokens back into cash on demand. None of that is unusual by global standards. What’s notable is that Kenya is requiring it up front, before licensing even opens.

The Licensing Deadline Is the Harder Problem

Capital requirements are steep. The CBK has set a KSh 300 million threshold for digital asset operators, with stablecoin issuers facing the highest bar of any license category. Operators that miss the November 4 deadline risk fines up to KSh 10 million and prison terms of up to 10 years for unlicensed operation.

Over 50 Kenyan virtual asset firms have formed a lobby group, the Virtual Assets Association of Kenya, to coordinate their response. Kotani Pay’s chief operating officer, Samuel Kariuki, said publicly that operators want to comply and are waiting only on the finalized rules to start applying. That patience is now being tested: the rules are final, but neither regulator has approved a single license, leaving roughly three months to build an entire licensed industry from scratch.

Why This Framework Exists: The FATF Problem

Kenya didn’t build this framework in a vacuum. The Financial Action Task Force grey-listed Kenya in February 2024, flagging weak anti-money-laundering and counter-terrorism-financing controls. One of FATF’s required fixes was a licensing regime for virtual asset service providers. The VASP Act and its regulations are Kenya’s direct answer to that grey-listing, not just a response to stablecoin growth.

Kenya’s rules aren’t only about consumer protection or monetary policy. They’re also about exiting a watchlist that makes cross-border banking harder for every Kenyan institution.

How Kenya Compares to Nigeria and South Africa

Kenya, Nigeria, and South Africa are now running three different regulatory experiments at once.

South Africa moved first and built the most mature licensing pipeline. The Financial Sector Conduct Authority has approved 310 of 533 applications for its Crypto Asset Service Provider license since 2023.

Nigeria took a phased approach. The Securities and Exchange Commission’s Accelerated Regulatory Incubation Programme lets firms operate under a provisional Approval-in-Principle while working toward full registration. No Nigerian exchange has converted that approval into a full license yet.

Kenya has skipped the incubation step and gone straight to a single, comprehensive rulebook. That’s a more aggressive starting position than either Nigeria or South Africa took, and it’s the first African framework to draw an explicit legal line between a stablecoin and a yield product.

Why This Matters

Kenya’s regulations mark a shift in how African regulators think about stablecoins. The debate is no longer whether they should be allowed. It’s what they’re allowed to become.

By banning interest, Kenya has drawn a line few other jurisdictions have drawn yet: stablecoins are payment infrastructure, not a savings product competing with a bank account. If the licensing rollout works, and three months is a tight window to test that, Kenya’s model gives other African regulators a template they can copy rather than draft from scratch.