What Cryptocurrency Is and How It Works in Kenya

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Cryptocurrency in Kenya, commonly known as “crypto,” is a type of digital or virtual currency that relies on cryptography for security.

Unlike the Kenyan shilling, which is issued and regulated by the government, cryptocurrencies operate on decentralized networks, meaning no single authority or central bank controls them.

The first and most well-known cryptocurrency, Bitcoin, was introduced in 2009 by the pseudonymous Satoshi Nakamoto as a peer-to-peer electronic cash system.

Today, thousands of cryptocurrencies exist, including Ethereum, which supports smart contracts, and stablecoins such as USDT, pegged to the US dollar to reduce price volatility.

Cryptocurrency works in Kenya through blockchain technology, a distributed digital ledger that records transactions across multiple computers. Transactions are grouped into “blocks” and cryptographically linked to form an immutable chain, ensuring transparency and preventing double-spending without the need for intermediaries such as banks.

Users store their crypto in digital wallets, secured by private keys, which function as long, unique passwords. To send cryptocurrency, a user signs a transaction with their private key and broadcasts it to the network.

Validators, either miners using proof-of-work or stakers using proof-of-stake mechanisms, confirm the transaction. Once validated, the block is added to the blockchain, and the recipient’s wallet is updated.

Transaction fees, paid in the cryptocurrency itself, incentivize validators and cover network costs. This process allows for fast, borderless, and continuous transfers, though volatility remains a common risk for investors and traders.

How Cryptocurrency Works in Kenya

Trading cryptocurrency in Kenya happens through online exchanges, peer-to-peer (P2P) platforms, and increasingly via mobile money services. Kenyans can access international platforms such as Binance, or local exchanges like Yellow Card.

P2P trading also allows direct transactions between individuals using the Kenyan shilling (KES).

Mobile money integration, particularly through M-Pesa, has been a significant driver of crypto adoption in the country, enabling easy deposits and withdrawals between KES and cryptocurrencies.

Once purchased, crypto is stored in digital wallets. There are two main types of wallets:

Hot wallets: Online wallets accessible via mobile apps or web platforms, convenient for frequent transactions.
Cold wallets: Offline hardware wallets, preferred for long-term storage or large holdings due to enhanced security.

Beyond trading, Kenyans use cryptocurrency for several purposes:

Inflation hedge: Stablecoins like USDT help protect against the depreciation of the Kenyan shilling.
International remittances: Crypto enables faster and cheaper cross-border transfers compared to traditional banking channels.
Side income: Many engage in crypto trading as a form of additional income, taking advantage of market volatility.

Regulation and Taxation of Cryptocurrency in Kenya

The legal landscape for cryptocurrency in Kenya has shifted from a “grey area” to a regulated environment.

The Virtual Asset Service Providers (VASP) Act, enacted in 2025, establishes licensing requirements for all virtual asset service providers, including exchanges and wallet providers.

The Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) are tasked with regulatory oversight and are currently finalizing detailed licensing guidelines.

Regarding taxation, the previous Digital Asset Tax was replaced with a 10% excise duty on transaction fees charged by crypto exchanges, simplifying compliance while encouraging participation in the market.

Additionally, the emergence of Bitcoin ATMs in Nairobi, following the VASP Act, demonstrates a growing formalized crypto market accessible to the public.

Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.