CBK Regulations Could Weaken Shilling, Raise Cross-Border Costs

Kenya's Central Bank has introduced new regulations for virtual asset service providers (VASPs), including stablecoin issuers. The VASP Regulations, 2026, require approval from the CBK before commencing operations, a minimum paid-up capital of Ksh300 million, and full backing of digital currencies with reserve assets.

Experts warn that restricting access to globally accepted dollar-backed stablecoins such as USDT and USDC could weaken the shilling and raise transaction costs. Pankaj Bengani, co-founder of Meld, noted that the value of stablecoins comes from network effects, and restricting access to global stablecoins could leave businesses with fewer payment options and higher costs for cross-border payments.

The regulations aim to strengthen oversight and protect Kenya's monetary sovereignty but may have unintended consequences. Bengani warned that a more fragmented market with higher costs for cross-border payments could result if locally issued alternatives are not widely accepted before restricting global stablecoins.