Kenya draft rules would require stablecoin issuers to keep reserves in local banks

In short

Kenya has proposed new rules that tighten how stablecoins can be issued in the country.

Stablecoin issuers would need fully backed reserves, with a minimum share kept in segregated accounts at Kenyan banks.

What happened

Kenya’s National Treasury published draft Virtual Asset Service Providers Regulations in March. The rules are now open for public comment.

A stablecoin is a crypto token designed to hold a steady price, often by being backed by cash or near-cash assets. The draft rules say any firm issuing a stablecoin to the public in Kenya must hold fiat-backed reserves at all times.

Those reserves must be held in high-quality liquid assets, meaning cash, bank deposits, or very short-term government securities. The draft limits government securities to maturities of 90 days or less.

At least 30% of customer funds backing a stablecoin must sit in segregated accounts at commercial banks domiciled in Kenya. Segregated means kept separate from the issuer’s own money.

The reserves must also be ring-fenced, meaning protected from third-party claims and kept available for redemptions. Stablecoins must be redeemable at par on demand, meaning users should be able to cash out 1 token for 1 shilling-equivalent value when they ask.

The draft also bans issuers from paying interest or yield on stablecoins.

Why it matters

If passed, the rules would push stablecoin businesses toward a bank-like operating model with strong oversight and higher capital discipline.

Keeping a meaningful slice of reserves in Kenyan banks could reduce offshore custody risk, but it may raise costs for smaller issuers and limit business models that rely on investing reserves for yield.

For fintechs building on stablecoins, the rules signal that regulators want consumer redemption rights to be clear and enforceable, especially if an issuer fails.

They also suggest Kenya is trying to keep stablecoin liquidity, data, and control onshore, rather than routed through foreign banks and custodians.