By Racheal Nagawa | Senior Reporter, Business Express
Nairobi, Kenya – Kenyan banks are being encouraged to integrate stablecoins and blockchain technology into their operations as the country finalizes regulations under the Virtual Asset Service Provider Act of 2025. A roundtable hosted last Thursday at the Capital Club of East Africa, held on the sidelines of the Africa Tech Summit Nairobi, brought together regulators, commercial banks, and digital-asset firms to discuss opportunities and risks in adopting these emerging financial technologies.
The discussions focused on using stablecoins and blockchain to enhance cross-border payments, settlement, and treasury operations, while remaining compliant with anti-money laundering (AML) and capital requirements. Participants emphasized that banks failing to adopt digital-asset capabilities risk losing market share, custody income, and cross-border transaction volumes to technology platforms and offshore intermediaries.
“The integration of stablecoins and blockchain technology is no longer a peripheral fintech hobby. It is a central pillar of future cross-border payments, settlement efficiency, and financial inclusion,” said Andrew Barden, CEO of The Kenyan Wall Street.
Regulatory Clarity Opens New Doors
The Virtual Asset Service Provider Act establishes licensing and supervisory frameworks for cryptocurrency exchanges, custodians, and other intermediaries. Firms will be required to maintain governance controls, cybersecurity protections, and comply with ongoing regulatory oversight. The law represents a shift from the cautious guidance issued by the Central Bank of Kenya (CBK) in 2015, which largely kept banks away from digital assets.
Bank representatives noted that the law provides a rare opportunity to align innovation with regulation from the start, rather than retrofitting controls after adoption.
“The opportunity for us is to shape what we want to do and the regulations are coming with that hand in hand. Previously, the regulator would step in to put order, but now they look like they want to put an orderly start to a process,” said Fidelis Muia, Director of Technical Services at the Kenya Bankers Association.
Licensed digital-asset platforms can now partner directly with banks, establish regulated custody structures, and provide consumer protections such as dispute resolution and audited asset controls. In contrast, unregulated peer-to-peer channels remain widespread in Kenya, exposing users to fraud, custody failures, and counterparty risks.
“For any business to operate and provide a service, there needs to be a relationship with a banking partner. Unfortunately, at this moment, that’s not possible, so there’s still a big vacuum in the local market for consumer protection,” said Marius Reitz, General Manager for Africa at Luno.
Stablecoins: Bridging Forex and Efficiency Gaps
Industry participants highlighted stablecoins as a tool to improve foreign-exchange access, reduce transaction friction, and accelerate international payments, particularly in markets with uneven dollar liquidity. Observers cited lessons from South Africa and Mauritius, where regulators amended existing frameworks to allow exchanges, custodians, and service providers to operate legally under supervision, providing a blueprint for Kenya.
“All these innovations have their own inherent risks. The question is how do we manage them in a way that will enable innovation, inclusion, and growth of our financial structure?” said James Mabuti Mutua from Tether, the world’s largest stablecoin issuer.
Mutua described the “stablecoin sandwich” model, where licensed payment providers in two countries anchor customer onboarding while a stablecoin facilitates cross-border settlement, reducing intermediaries and foreign-exchange costs.
Kenyan bankers acknowledged that corporate and high-net-worth clients are already using stablecoins for trade, treasury, and hedging outside traditional banking channels. Younger entrepreneurs, exporters, and tech firms are increasingly defaulting to blockchain-based finance, raising the urgency for banks to adapt or risk losing revenue from FX spreads, fees, and deposit intermediation.
Partnerships as a Path Forward
Speakers stressed that partnerships between banks and licensed crypto platforms are the fastest route to harmonizing innovation and compliance. Apollo Sande, country manager for Luno, cited South Africa’s integration with Discovery Bank, which allowed direct crypto purchases via the bank’s consumer app—a model that combined safety and usability.
Regional peers like Absa Group and Standard Bank were also referenced as examples of banks embedding digital-asset services into institutional custody, stablecoin reserves, and tokenized financial instruments, creating new revenue streams and client opportunities.
As Kenya moves to implement its regulatory framework, the discussions underscored that stablecoins and blockchain are poised to become central to banking, trade, and financial inclusion, provided institutions act quickly to build capabilities and partnerships.
About the Author
Racheal Nagawa is Senior Reporter at Business Express Magazine, specializing in fintech, digital assets, and emerging technologies in Africa. She covers innovation in banking, blockchain adoption, and regulatory trends shaping financial markets in East Africa. This news was originally published on SA Varsity News.
