Kenya Slashes Stablecoin Capital Rules, Bans Interest Payments

The National Treasury of Kenya has introduced new regulations that reduce the capital requirement for stablecoin issuers by 40% but maintain strict local reserve mandates and ban interest payments on digital tokens.

The regulations, which operationalize the Virtual Asset Service Providers (VASP) Act of 2025, aim to strike a balance between fostering financial innovation and safeguarding the economy against money laundering and currency flight.

According to the new rules, any entity issuing a stablecoin must hold at least 30% of all fiat currency received in segregated trust accounts hosted by licensed Kenyan commercial banks. The remaining 70% must be invested in eligible domestic reserve assets.

The regulations also ban the payment of interest to stablecoin holders, defining 'interest' as any remuneration or benefit tied to the duration a customer holds the token. This move mirrors the European Union's Markets in Crypto-Assets (MiCA) regulation and aims to prevent stablecoins from acting as shadow banks offering high-yield speculative investments.

The framework presents a significant challenge for offshore giants like Tether (USDT) and Circle (USDC), which may be forced to either establish physical offices in Nairobi or withdraw their services from the Kenyan market by the November 4, 2026 compliance deadline.