Kenya is taking a major step to protect crypto investors amid plans by the country’s financial market regulator, Capital Markets Authority (CMA), to establish a dedicated compensation fund for virtual-asset traders. The move comes after the Virtual Asset Service Providers Act was signed into law in October 2025, providing the country’s first comprehensive legal framework for cryptocurrency regulation.
The fund would operate separately from existing investor protection schemes for equities, recognizing that crypto markets operate under different mechanisms and carry unique risks. CMA Chief Executive Wycliffe Shamiah said the initiative will enhance investor confidence while supporting the growth of Kenya’s crypto sector.
CMA Compensation Fund Aims to Safeguard Kenya Crypto Investors
In an interview with the East African, she proposed that the fund will provide a safety net for licensed virtual-asset providers in the event they fail to meet contractual obligations. Unlike the existing Investor Compensation Fund, which offers protection of up to KSh 200,000 per investor in the equity market, the CMA’s crypto fund will account for the distinctive risks of digital assets.
“Those are purely different markets,” Shamiah emphasized. “We have the normal capital markets, but virtual assets are new creations, so the discussions we are having are about what layers of protection we can have in their cases and whether a fund can be set up for that purpose. That is a discussion we need to have at some point, but I don’t think we want to mix them because these are two different markets.”
The initiative builds on international guidance, including support from the International Monetary Fund (IMF), which finalized a trip to Nairobi at the CMA’s request. The IMF mission provided technical advice on prudential and conduct aspects of the future regulatory framework, helping ensure that Kenya’s approach aligns with global best practices while remaining suited to the local market.
The fund also complements the broader regulatory context described by MMW Advocates in a recent report. The law firm noted that crypto adoption has surged despite the absence of regulations. By establishing a formal investor protection mechanism, CMA aims to secure the confidence of a population increasingly reliant on digital assets.
This initiative aligns with key provisions of the Virtual Asset Service Providers Act, which places supervision under existing regulators, including the CMA and Central Bank of Kenya. Per the passed law, licensed providers must maintain a physical presence in Kenya, appoint boards with at least three natural-person directors, segregate client assets, implement robust AML and data protection measures, and undergo independent IT audits.
The legislation will reduce the prevalence of shell operations and improve accountability in a market historically dominated by offshore entities. While the law allows for the eventual creation of a standalone virtual asset regulator, the Treasury retains the power to re-establish such an authority if necessary.
Rising Adoption and Enforcement Challenges
Kenya has over six million cryptocurrency users, with holdings estimated at more than $1.5 billion in Bitcoin alone. Peer-to-peer trading has also surged, allowing direct transactions in local currency and bypassing traditional banking, but also exposing traders to fraud.
In response to this growth, the Directorate of Criminal Investigations (DCI) has established a specialized unit to tackle digital asset crime and recently launched a training module in blockchain forensics to equip investigators with skills to trace illicit activity.
Crypto-related losses in Kenya reached over $43 million in 2024, a 73% increase from the previous year, with early 2025 figures already surpassing that total. Cases now include not only scams but also the misuse of digital assets for financing terrorism and other criminal activities. The DCI has handled over 500 crypto-related cases in the past three years.
CMA’s compensation fund complements these enforcement efforts by providing legal recourse for investors. Shamiah emphasized that the fund will ensure investors are protected while allowing the sector to innovate. By introducing tailored safeguards, Kenya aims to become a model for digital asset oversight in Africa, joining countries such as South Africa and Mauritius that have established comprehensive regulatory frameworks for crypto.
