KIBIRU MUTHAKA: Bill to regulate virtual asset transactions the way to go

Kibiru Muthaka, the CEO of TapSwap Exchange

By KIBIRU MUTHAKA

Kenya has long been at the forefront of technological innovation in Africa. The success of M-Pesa is testament to our ability to leverage technology for financial inclusion, transforming how millions of Kenyans and Africans transact.

Now, with the recently introduced Virtual Asset Service Providers (VASP) Bill, 2025, we have an unprecedented opportunity to shape the future of digital finance in Kenya and across the continent.

As the vision bearer of TapSwap Exchange, an African crypto exchange built for the African market, I see the VASP Bill as more than a regulatory initiative.

It is a clarion call for Africa to embrace the transformative potential of cryptocurrency and blockchain technology.

At TapSwap, our vision has always been to provide a gateway to the global financial system for millions of Africans. With a smartphone, anyone can access the global crypto market, enabling financial empowerment and bridging the gap between traditional and digital economies.

The introduction of the VASP Bill is a welcome step towards legitimising the crypto industry in Kenya.

South Africa, for example, has already set a high benchmark in Africa by introducing regulations through the Financial Sector Conduct Authority (FSCA).

In 2024, the FSCA issued more than 200 crypto licenses, positioning South Africa as a leader on the continent in adopting secure and forward-thinking crypto policies. Kenya risks being left behind if we fail to implement clear, actionable frameworks that foster innovation and attract investment.

Regulation, when thoughtfully crafted, can foster trust by creating a safer environment for users, significantly reduce scams, and encourage participation in the crypto ecosystem. 

Clear regulatory frameworks provide a level of certainty that attracts both local and international investors, essential for the growth of the digital economy. Such regulatory measures also enhance consumer protection by ensuring fairness and transparency through promotion of ethical practices within the industry.

One of the VASP Bill’s commendable provisions is its emphasis on addressing low levels of public awareness and literacy regarding virtual assets. Education and capacity-building initiatives are vital to fostering informed participation in the crypto ecosystem.

Already, we have startups like Kotani Pay and TapSwap Exchange that are complementing these efforts by providing educational resources and community engagement programs to empower users.

While the VASP Bill introduces much-needed regulation, it is imperative that the government revisit the Digital Assets Tax (DAT) under Section 12F of the Income Tax Act. The current tax framework:

1. Lumps Together Distinct Activities: It fails to distinguish between personal investment and business activity, leading to unfair taxation of long-term holders who derive no immediate income from their assets.

2. Lacks Clarity on Taxable Events: Transferring crypto between wallets owned by the same person is not a value-creating event, yet it is taxed the same as a profitable trade or sale.

3. Ignores the Unique Nature of Crypto Transactions: The simplified approach does not account for the complexities of valuing and transacting in digital assets.

A more nuanced approach is needed, one that recognises the diversity of crypto use cases and ensures fairness while promoting compliance.

For the VASP Bill to succeed, the government must actively involve industry stakeholders in its critique and amendment. Collaborative policymaking ensures that regulations are well-informed, practical, and conducive to innovation.

Globally, the perception of cryptocurrency is shifting. Kenya has the opportunity to position itself as a leader in Africa by implementing a regulatory framework that is inclusive, secure, and forward-thinking, enabling local innovators like TapSwap Exchange to build and thrive. We successfully concluded our Beta trial in mid-2024, with tens of thousands of users signing up and validating the strong demand for a homegrown crypto solution.

Today, TapSwap's full web platform supports over 20 cryptocurrencies, enabling users to deposit USDT, swap digital assets, and trade seamlessly.

In this quarter, we plan to introduce on-ramp and off-ramp services, allowing users to purchase crypto directly using mobile money, bank cards, Google Pay, or Revolut Pay, depending on their location. A mobile app will follow shortly after, ensuring crypto accessibility for every African smartphone user.

The VASP Bill is more than a regulatory initiative; it is an opportunity to champion Africa’s journey toward digital transformation. Kenya’s leadership in mobile money provides a blueprint for what can be achieved with crypto and blockchain technology.

At TapSwap Exchange, we stand ready to support this vision, providing a secure, compliant, and innovative platform for all Africans.

To learn more about our work and vision, visit www.tapswap.io. Together, let us build a future where digital assets empower every Kenyan and every African with the freedom to choose and thrive in the crypto economy.

The writer is the CEO of TapSwap Exchange