Kenya's Virtual Asset Service Providers (VASP) Regulations, 2026 represent the country's most significant regulatory development for the digital asset industry since the enactment of the VASP Act in 2025. While much attention has focused on licensing requirements, capital thresholds, and compliance obligations, one provision has received surprisingly little coverage — despite its potential to reshape how businesses enter the Kenyan crypto market entirely.
That provision is Regulation 11, and it allows the assignment and transfer of a VASP licence, subject to regulatory approval. In practical terms, Kenya now has a secondary market for licensed crypto businesses. For investors, founders, and fintech operators, this changes everything.
Need guidance on VASP licensing or licence transfers? Contact M&O Fintech Consultants — we advise on applications, acquisitions, and regulatory strategy.
Understanding Regulation 11: The Mechanics
Regulation 11 creates a formal mechanism for the transfer of VASP licences between parties. This is not a backdoor or regulatory loophole — it is an intentional provision designed to balance compliance oversight with commercial flexibility and investment growth.
The regulation imposes clear conditions on both the transferring licensee and the proposed transferee. These conditions ensure that only compliant, operational businesses can be transferred, and that the acquiring party meets the same standards expected of a new applicant.
Conditions for the Transferring Licensee
A VASP licence may only be transferred where the current licensee has:
- Commenced actual operations — the licensee must be actively conducting business, not merely holding a dormant licence
- Held the licence for at least 36 months — this ensures the licensee has a sufficient compliance track record and operational history
- Fully complied with the Regulations — no outstanding regulatory breaches, enforcement actions, or compliance failures
Conditions for the Proposed Transferee
The party seeking to acquire the licence must:
- Meet all standard licensing requirements — including capital, governance, fit-and-proper personnel, and infrastructure
- Clear any outstanding regulatory obligations — including the transfer approval fee and any conditions imposed by the regulator
- Obtain formal approval from the relevant regulator — either CBK or CMA, depending on the VASP category
Transfer Approval Fee
The Regulations prescribe a transfer approval fee of 0.25% of the transaction value, payable to the regulator. This fee applies to the total consideration for the licence transfer, including any associated business assets.
Why Regulation 11 Matters
To understand the significance of Regulation 11, it is important to appreciate the reality of obtaining a VASP licence in Kenya.
The VASP Act and Regulations impose a rigorous licensing framework. Applicants must demonstrate:
- Substantial minimum capital — ranging from KSH 2.5 million for investment advisors to KSH 500 million for stablecoin issuers
- Robust AML/CFT controls — including customer due diligence, transaction monitoring, and suspicious activity reporting
- Governance structures — fit-and-proper directors, compliance officers, and risk management frameworks
- Cybersecurity infrastructure — secure custody solutions, incident response capabilities, and data protection measures
- Ongoing regulatory oversight — periodic reporting, inspections, and compliance with evolving regulations
The licensing process is time-consuming, expensive, and complex. For investors and operators seeking rapid market entry, the barrier to entry is significant.
Regulation 11 creates a credible alternative. Instead of building from the ground up, an investor can acquire an existing licensed VASP — one that has already cleared regulatory hurdles, demonstrated operational compliance, and accumulated the required 36-month track record.
The Strategic Advantage
In many respects, Regulation 11 treats a VASP licence as a transferable commercial asset — similar to how intellectual property, trademarks, or banking licences can be assigned or transferred as part of a corporate transaction. This is a sophisticated regulatory approach that recognises the commercial reality of the digital asset industry.
What This Opens: Commercial Opportunities
The licence transfer mechanism creates several distinct commercial pathways:
Mergers and Acquisitions
Regulation 11 enables structured M&A transactions in the digital asset sector. Private equity firms, strategic acquirers, and corporate investors can acquire licensed VASPs as going concerns, gaining immediate regulatory standing, customer bases, and operational infrastructure.
Venture Capital and Private Equity Investment
VC and PE investors can now structure investments around licensed VASP acquisitions, using Regulation 11 as the mechanism for gaining control. This provides a faster path to market than incubating a new licensee.
Strategic Partnerships
International crypto platforms and fintechs can enter the Kenyan market by acquiring a stake in — or full ownership of — an existing licensed VASP. This provides local regulatory cover and market knowledge.
Corporate Restructuring
Businesses can restructure their Kenyan operations through licence transfers, optimising corporate structures for tax, governance, or strategic purposes.
Founder Exit Opportunities
Perhaps most significantly, Regulation 11 creates a clean exit pathway for VASP founders. After 36 months of compliant operations, founders can sell their licence and business to a qualified buyer — providing a return on investment and a mechanism for succession planning.
| Opportunity Type | Description | Key Consideration |
|---|---|---|
| M&A Acquisition | Buy a licensed VASP as a going concern | Regulatory due diligence on compliance history |
| PE/VC Investment | Structure investment around licence acquisition | 36-month operational threshold |
| Strategic Partnership | Acquire stake in existing VASP for market entry | Transferee licensing requirements |
| Corporate Restructuring | Transfer licence within corporate group | Regulator approval required |
| Founder Exit | Sell compliant VASP after 36 months | 0.25% transfer approval fee |
The PSP Contrast: Why VASP is Different
It is worth noting that Regulation 11's approach differs fundamentally from Kenya's Payment Service Provider (PSP) framework, where licences are generally non-transferable.
Under the PSP regime, businesses seeking to enter the payments market typically rely on:
- White-label arrangements — rebranding an existing PSP's services
- Merchant and sub-merchant models — operating under a licensed PSP's umbrella
- Agency arrangements — building agent networks under a licensed PSP
- API integrations — connecting to licensed PSPs and mobile money operators
While these models work, they do not provide the same level of control, ownership, or strategic flexibility as a direct licence — or a transferable licence. The VASP framework's approach represents a more sophisticated understanding of digital assets as a maturing asset class.
Key Distinction
PSP licences: Non-transferable. Entry via partnerships, white-label, or agency models.
VASP licences: Transferable under Regulation 11. Entry via acquisition, direct application, or partnership.
Navigating a Licence Transfer: Practical Considerations
For parties considering a VASP licence transfer under Regulation 11, several practical factors require careful attention:
Regulatory Due Diligence
The acquiring party must conduct thorough due diligence on the target VASP's compliance history. This includes reviewing regulatory filings, inspection reports, AML/CFT programme effectiveness, and any enforcement actions. A compliance failure by the transferor can derail the transfer or create liability for the transferee.
Transaction Structuring
The transfer must be structured to meet the regulator's approval requirements. This includes the 0.25% transfer fee, satisfaction of transferee licensing conditions, and any additional requirements imposed by CBK or CMA on a case-by-case basis.
Timing and Process
Licence transfers require formal regulatory approval. Parties should factor in sufficient time for the regulator's review process, which will include assessment of both the transferor's compliance record and the transferee's suitability.
Commercial Negotiations
Beyond the regulatory aspects, the commercial terms of a VASP transfer — including valuation, representations and warranties, and post-transfer obligations — require careful negotiation. The 36-month operational threshold creates a scarcity value for compliant VASPs.
How M&O Fintech Consultants Can Help
At M&O Fintech Consultants, we advise clients on all aspects of VASP licensing, transfer, and compliance in Kenya. Our services include:
Buy-Side Advisory: Acquiring a VASP Licence
- Identifying licensed VASP targets that meet the 36-month operational threshold
- Regulatory due diligence on the target's compliance history and regulatory standing
- Structuring the transaction to meet regulator approval requirements
- Liaising with CBK and CMA on the licence transfer application
- Navigating the 0.25% transfer fee and other regulatory costs
Sell-Side Advisory: Exiting Your VASP Business
- Preparing your VASP for transfer — compliance audits, documentation, and gap remediation
- Valuation advisory for your licence and business
- Identifying qualified buyers who meet transferee requirements
- Managing the regulatory approval process from application to completion
- Structuring founder exits and succession plans
VASP Licence Application Support
- Full VASP licence application preparation and submission to CBK or CMA
- Compliance framework design — AML/CFT, governance, cybersecurity, data protection
- Regulatory strategy and roadmap to meet all licensing conditions
- Ongoing compliance monitoring and regulatory reporting post-licence
Cross-Cutting Services
- AML/CFT compliance programme design and implementation
- Corporate structuring for fintech and digital asset businesses
- Regulatory engagement and liaison with CBK, CMA, and other regulators
- RegTech advisory — compliance technology selection and implementation
- Training and capacity building for boards and compliance teams
Considering a VASP Acquisition or Licence Application?
The market is forming now. Early movers will be the ones who understand the regulatory landscape before it gets crowded.
Contact M&O Fintech Consultants for a confidential consultation on your Kenya market entry strategy.
Conclusion
Regulation 11 signals a pragmatic, commercially aware regulatory approach. By allowing the transfer of VASP licences, Kenya's regulators have created a mechanism that balances strict compliance oversight with the flexibility needed to attract investment and encourage market growth.
For investors looking at Kenya's digital asset sector, acquiring a compliant, licensed VASP may become a significantly more attractive option than undertaking the licensing process from the ground up. The 36-month operational threshold ensures that only proven, compliant businesses enter the secondary market — protecting consumers and maintaining regulatory standards.
For founders, the provision creates a clear, legitimate exit pathway that recognises the value of a compliant VASP licence as a commercial asset. This is a development that should encourage further investment and entrepreneurship in Kenya's digital asset ecosystem.
The window is open. The question is who moves first.
M&O
M&O Fintech Consultants
Regulatory intelligence for the digital economy. We advise on VASP licensing, PSP licensing, fintech regulation, digital assets, AML/CFT compliance, and corporate transactions across African markets. Visit mofintech.africa
VASP LicensingCrypto RegulationKenyaDigital AssetsFintechRegulation 11Licence TransferM&AAML/CFTCentral Bank of KenyaCapital Markets AuthorityMarket Entry
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