How Kenya's Crypto Regulation Could Shape Cross Border Payments Across Africa’s $100bn Remittance Market

Kenya’s crypto regulation has reached an inflection point. For years, digital assets sat in an ambiguous corner of the financial system. The Central Bank warned that cryptocurrencies were not legal tender. Parliament introduced a digital asset tax in 2023. Startups kept building anyway.

Now the argument has matured. It is no longer about whether crypto exists in Kenya. It is about who supervises it, who taxes it, and who carries the risk when volatility or fraud hits retail users.

At a recent stablecoin conference in Nairobi, the industry’s message was direct. Give us clarity. Harmonise the rules. Coordinate the regulators. Beneath that language sits a harder demand. Accept that digital assets are already embedded in cross border trade and remittance flows and regulate them accordingly.

The state, for its part, is cautious. Kenya’s monetary authorities are not in the business of enthusiasm. They are tasked with guarding financial stability. That mandate does not bend easily to hype cycles.

What we are seeing is less a culture clash than a jurisdictional contest over who defines the perimeter of Kenya’s financial system.

Stablecoins and the $500m Question

Industry executives estimate that Kenyans transact about $500m per month in stablecoins. The figure is large enough to draw scrutiny, though still small compared to the formal banking system’s total monthly throughput. Stablecoins, typically pegged to fiat currencies, have become the workhorse of this ecosystem. They are less volatile than speculative tokens and easier to deploy for cross border payments.

The appeal is practical. African trade under the African Continental Free Trade Area covers a market valued at $3.5tn. Settlement friction remains real. Cross border transfers can take days and incur steep fees. In that context, a dollar-backed token that moves in minutes starts to look less like a speculative instrument and more like plumbing.

Yet plumbing can leak. Regulators point to fraud, capital flight and money laundering. The Central Bank has repeated that crypto assets are not legal tender. That distinction is not cosmetic. Legal tender status affects enforceability, consumer recourse and systemic exposure.

Kenya crypto regulation therefore sits at a junction. If stablecoins are treated as payment instruments, they move closer to central bank oversight. If they are treated as investment products, the Capital Markets Authority gains more leverage. If they are taxed primarily as digital commodities, the National Treasury’s revenue lens dominates.

Each path carries institutional consequences.

The 2023 Digital Asset Tax and Its Discontents

In 2023, Kenya introduced a digital asset tax targeting income derived from the transfer or exchange of digital assets. The move formed part of broader revenue mobilisation efforts. It also jolted the sector.

Industry representatives argue that the tax arrived before the rulebook was settled. Tax first, clarity later. That sequence breeds anxiety. Startups operating on thin margins do not absorb compliance costs lightly. Investors weigh regulatory predictability before wiring capital.

There is also a structural tension. If the state taxes digital asset transactions aggressively while maintaining that cryptocurrencies are not legal tender, it risks sending mixed signals. On one hand, it asserts fiscal jurisdiction. On the other, it distances itself from the asset class.

This is not a philosophical debate. It affects incorporation decisions, capital allocation and where founders choose to domicile new ventures. Africa’s fintech ecosystem has already recorded a 22 percent year on year increase in deal volume in 2023, according to PwC’s Global M&A Trends 2023. McKinsey projects fintech revenues could reach $47bn by 2028, up from about $10bn in 2023. Investors read regulatory tea leaves as closely as revenue projections.

Kenya has historically marketed itself as a fintech hub. That status is earned through legal clarity as much as code.

The Coordination Problem Inside Government

Calls for closer coordination between the Central Bank and the Capital Markets Authority are not procedural nitpicking. They reflect a deeper ambiguity about the nature of digital assets.

If a stablecoin functions like a stored value instrument, it touches payment systems law. If it trades on secondary markets, it resembles a security. If it is used for remittances, it intersects with foreign exchange controls and anti money laundering frameworks.

Fragmented oversight can produce regulatory arbitrage. Firms shop for the friendliest interpretation. Consumers fall into gaps.

Kenya’s crypto regulation must therefore answer a structural question. Will digital assets be governed through a single comprehensive framework, or through layered amendments to existing banking, securities and tax laws?

The former demands political capital and legislative bandwidth. The latter is administratively easier but risks inconsistency.

Remittances, Risk and the $100bn Backdrop

Remittances into Africa reached an estimated $100bn in 2024. Kenya remains one of the continent’s largest recipients. For households relying on diaspora inflows, transfer fees are not an abstract line item. They are school fees, rent and medical bills.

Stablecoins promise lower costs and faster settlement. That narrative resonates in a country that embraced mobile money long before many Western markets took digital payments seriously. Kenya’s familiarity with mobile wallets has lowered the psychological barrier to digital tokens.

Still, the memory of financial scams lingers. Crypto markets have a record of sharp price collapses and exchange failures globally. Regulators are wary of contagion. Even if stablecoins are pegged, the entities backing them can falter. If a large stablecoin used in Kenya were to fail, the reputational and political fallout would not spare policymakers.

Balancing inclusion with prudence is not glamorous work. It involves capital requirements, disclosure standards and enforcement capacity. It also involves admitting that informal adoption often outruns formal oversight.

A Regional Lens Beyond Nairobi

Kenya’s approach will not unfold in isolation. Nigeria, South Africa and smaller African markets are drafting their own rules. Cross border harmonisation under AfCFTA is a live issue. Divergent standards could complicate the very trade flows that stablecoin advocates cite.

If Kenya adopts a clear licensing regime with defined thresholds, reporting obligations and consumer safeguards, it could attract firms seeking a predictable base. If it oscillates between warning notices and piecemeal taxes, firms may look elsewhere.

There is a reputational dimension here. Kenya’s fintech story, built on mobile money and digital banking innovation, has carried weight across the continent. The question now is whether crypto policy reinforces that legacy or muddies it.

The Next Phase Is Less About Hype

The tone of recent discussions suggests fatigue with grand promises. Industry leaders speak in the language of harmonisation and compliance rather than disruption. Regulators speak of safeguards rather than bans.

Kenya crypto regulation is moving from abstract debate to institutional design. The details will determine whether stablecoins become a formal layer of the financial system or remain a parallel channel tolerated but not fully embraced.

The outcome will not hinge on a single bill or conference. It will rest on how tax policy aligns with licensing, how enforcement keeps pace with adoption and how candidly policymakers confront the fact that $500m in monthly stablecoin transactions already circulates beyond traditional rails.

Kenya has faced similar moments before. Mobile money was once viewed with suspicion. It is now foundational. Crypto is not mobile money, and the risks differ. But the underlying question is familiar. When innovation outruns regulation, does the state chase it, shape it, or resist it?

For now, Nairobi is drafting its answer.

Go to TECHTRENDSKE.co.ke for more tech and business news from the African continent and across the world. 

Follow us on WhatsApp, Telegram, Twitter, and Facebook, or subscribe to our weekly newsletter to ensure you don’t miss out on any future updates. Send tips to editorial@techtrendsmedia.co.ke