How the Virtual Assets Providers Bill 2025 Will Impact Gaming, Insurance, and Other Sectors

INTRODUCTION

The Virtual Assets Service Providers Bill, 2025 introduces a regulatory framework for virtual asset services and their providers in Kenya. Here's an analysis and sector-wise summary of its impacts, particularly on gaming, insurance, and other sectors:
GENERAL OVERVIEW
•    Objective: To regulate virtual asset service providers (VASPs) and mitigate risks such as money laundering, fraud, terrorism financing, and market instability.
•    Regulators: The Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK) are the primary regulators, with provisions for additional regulatory bodies (e.g., BCLB, Data Protection Office) to be included where necessary.
•    Licensing & Supervision: VASPs will need to be licensed, undergo fit-and-proper assessments, comply with anti-money laundering laws, and meet consumer protection standards.

IMPACT ON GAMING & BETTING SECTOR

• Use of Virtual Assets in Betting/Gaming: Stakeholders proposed defining "Virtual Assets Betting/Gaming" as any form of gambling using virtual assets (e.g., crypto). While not explicitly included, the broad definition of virtual assets in the Bill allows gaming applications.
• Regulatory Gap Highlighted: Some stakeholders wanted virtual assets used in betting to be co-regulated by CMA and BCLB. However, the committee chose to keep the regulation of betting under the Betting, Lotteries and Gaming Act, not this Bill.
• Implication:
  • Gaming operators using virtual assets will be indirectly regulated under this Bill as VASPs but must also comply with betting laws.
  • No formal framework for "betting coins", although the Bill’s scope covers such tokens generally.
  • Calls for more coordination between CMA, CBK, and BCLB were noted but not fully adopted.

IMPACT ON INSURANCE SECTOR

• Cross-Sector Regulation: Clause 12(k) implies that insurance entities involved in virtual assets may require “no-objection” letters from their primary regulator (e.g., IRA – Insurance Regulatory Authority).
• Concern Raised: Stakeholders feared this could delay licensing. The committee clarified this applies only if VASPs operate across sectors.
• Implication:
  • Insurance companies offering crypto-related products (e.g., parametric covers, NFT-backed policies) would fall under both their sector regulator and VASP regulations.
  • Could lead to dual compliance requirements.

IMPACT ON OTHER SECTORS

Financial Sector

• Banking & Payments: Banks may need to adapt to handle VASPs' accounts; the Bill mandates every VASP to maintain a bank account in Kenya.
• Fintech: Introduces regulatory clarity, possibly accelerating innovation and investment—but could also burden startups with high compliance costs.

Data & Technology

• Data Protection & Cybersecurity: VASPs must comply with data privacy laws. The Office of the Data Protection Commissioner may play a role.
• Tech Startups: Licensing thresholds, fit-and-proper tests, and mandatory compliance officers could restrict small players unless sandbox options are created.

 Legal & Compliance

• AML/CFT Focus: Strong obligations on VASPs to prevent misuse of virtual assets.
• Consumer Protection: VASPs must disclose risks, segregate funds, and maintain continuity plans—raising the bar on legal responsibilities.

KEY TAKEAWAYS

• Gaming: Will be affected indirectly through regulation of virtual currencies used in wagering. Calls for CMA–BCLB collaboration were noted but deferred to primary betting laws.
• Insurance: May need to coordinate with CMA/CBK if offering crypto-related services. Could face dual oversight.
• All Sectors: Must prepare for stringent licensing, AML requirements, and potential cross-sector oversight.

REFERENCES

THE VIRTUAL ASSETS SERVICE PROVIDERS BILL 2025