Kenya has introduced new cryptocurrency regulations that give investigators stronger powers to seize digital assets linked to financial crimes, closing a longstanding gap in the country’s enforcement framework.
Under the new rules, investigators can, with court approval, seize hardware wallets, seed phrases, electronic devices, and other tools used to access cryptocurrencies suspected to be connected to fraud, money laundering, corruption, or terrorism financing.
While Kenyan authorities have long been able to trace suspicious cryptocurrency transactions, recovering the assets themselves has often proved difficult, particularly when they were stored in self-custodied wallets controlled solely by private keys.
Existing laws, including the Proceeds of Crime and Anti-Money Laundering Act and the Anti-Corruption and Economic Crimes Act, already allow authorities to freeze bank accounts and seize conventional financial assets. However, cryptocurrencies stored outside regulated exchanges have remained largely beyond their reach.
The new Virtual Asset Service Providers (VASP) Regulations, 2026, published on July 24, establish a legal framework for freezing, seizing, and managing digital assets as part of Kenya’s wider asset recovery regime.
According to the regulations, licensed virtual asset service providers served with a seizure order must grant authorised officers access to premises where digital asset devices are believed to be located. Investigators are also empowered to seize and retain physical devices, hardware wallets, seed phrase backups, or electronic systems required to access the assets.
A seed phrase the 12- or 24-word recovery code that restores access to a cryptocurrency wallet is often the only way to recover digital assets if a wallet is lost. Whoever controls the seed phrase controls the funds, making it a critical piece of evidence in cryptocurrency investigations.
The regulations form part of Kenya’s broader effort to strengthen its anti-money laundering and counter-terrorism financing framework as the country works toward exiting the Financial Action Task Force (FATF) grey list.
The need for clearer rules became evident earlier this year. In April, Kenyan authorities froze several Binance accounts linked to investigations into suspected fraud, money laundering, terrorism financing, and the movement of stolen public funds. Binance told affected customers that the restrictions had been imposed at the request of law enforcement agencies.
The new regulations provide a clearer legal basis for such actions. They define a freezing order as a directive issued by a competent court or lawful authority prohibiting the transfer, withdrawal, conversion, or disposal of specified digital assets while investigations are ongoing.
The framework also addresses one of the biggest challenges investigators have faced: self-custodied wallets. While authorities could previously request that centralised exchanges restrict accounts, assets stored in privately controlled wallets often remained inaccessible, even when investigators could identify where the funds were held.
Another key provision deals with cryptocurrency price volatility. Digital assets can lose significant value during lengthy investigations or court proceedings. To prevent that, the regulations allow authorised officers, subject to court approval, to convert frozen cryptocurrencies into fiat currency to preserve their value until legal proceedings are concluded.
Once a freezing or seizure order is issued, exchanges and wallet providers must preserve the affected assets, prevent withdrawals or transfers, and provide investigators with access to relevant records and systems. Seized cryptocurrencies must then be transferred to a secure digital wallet controlled by the relevant government authority, creating a documented chain of custody for the assets.
The regulations apply to any virtual asset service provider operating in or targeting Kenya. This includes companies without a physical presence in the country if they actively serve Kenyan customers or generate revenue from the Kenyan market.
Failure to comply carries significant penalties. Licensed crypto operators that refuse to freeze assets, deny investigators access, or fail to assist with the seizure and transfer of digital assets could face fines of up to KES 5 million (about $38,600), prison terms of up to five years, or both. Corporate entities may be fined up to KES 8 million (around $61,800).
The regulations also align Kenya more closely with international anti-money laundering and counter-terrorism financing standards by bringing cryptocurrency exchanges, wallet providers, and stablecoin issuers under a formal licensing and reporting regime.
For years, Kenya’s cryptocurrency market grew rapidly through peer-to-peer trading with relatively limited regulatory oversight. The new framework marks a significant shift. Beyond licensing exchanges and taxing digital assets, it gives investigators explicit authority to seize the physical tools that control cryptocurrency wallets, making digital assets easier to recover during criminal investigations and placing Kenya among the African countries with the most comprehensive crypto enforcement powers.