Kenya empowers investigators to seize crypto wallets tied to financial crime

Kenyan investigators have never had much trouble spotting suspicious crypto transactions. Getting their hands on them has been the problem. The country’s new cryptocurrency regulations close that gap.

With court approval, the rules empower authorities, including financial crime investigators, to seize devices, seed phrases, and hardware wallets that unlock digital assets, allowing the government to control cryptocurrencies linked to fraud, money laundering, corruption, and terrorism-financing investigations.

Existing Kenyan laws, including the Proceeds of Crime and Anti-Money Laundering Act and the Anti-Corruption and Economic Crimes Act, already let investigators freeze traditional bank accounts and trace suspicious transfers. A crypto wallet whose owner kept the private keys offline, however, was difficult to access using general asset‑seizure powers.

The Virtual Asset Service Providers (VASP) Regulations, 2026, gazetted on July 24, establish a freezing and seizure framework for virtual assets within Kenya’s broader asset‑seizure regime.

“A licencee served with a seizure order shall grant an authorised officer access to any premises where the virtual asset devices are suspected to be and the authorised officer may seize and detain any physical device, hardware wallet, seed phrase backup or electronic system necessary to access the virtual assets,” the regulations read.

A seed phrase is the 12- or 24-word recovery code that helps a user regain access to their crypto assets. Whoever controls it can move the funds, which is precisely why investigators now have explicit legal grounds to seize it.

The regulations form part of Kenya’s broader effort to strengthen monitoring of money laundering, terrorism financing, and other illicit financial flows as the country works to exit the Financial Action Task Force (FATF) grey list.

In April, Kenyan authorities froze several Binance accounts linked to suspected fraud, money laundering, terrorism financing, and the movement of stolen public funds. Binance told affected users that some restrictions had been imposed at law enforcement’s request.

The new framework gives future freezes a much clearer footing. Under the Regulations, a freezing order is an order by a competent court or lawful authority directing a virtual asset service provider “to prohibit any dealing, transfer, conversion, withdrawal or disposal of a specified virtual asset,” giving investigators room to lock down assets before any seizure or forfeiture.

The April operation highlighted the limits of Kenya’s existing enforcement processes. Centralised exchanges could be pressured to restrict accounts, but self-custodied wallets sitting outside regulated platforms posed a harder problem: investigators could identify the wallet without being able to touch the assets inside it.

Crypto volatility is another target of the new rules. A token worth millions of shillings when frozen could lose a substantial portion of its value before a prosecution is completed. The regulations now allow authorised officers, with court approval, to convert frozen virtual assets into fiat currency during an investigation to preserve their value.

“The authorised officer may, upon approval of the competent court, convert virtual assets into fiat currency to preserve value,” the regulations read.

Once an order is issued, exchanges and wallet providers must preserve the affected assets, halt withdrawals and transfers, and give investigators access to relevant systems and records. Seized assets must then be transferred to a secure digital wallet controlled by the competent authority, creating a formal custody chain for recovered crypto assets.

The regulations apply to any provider operating “in or from Kenya.” A platform is deemed to meet that threshold if it actively solicits or targets Kenyan users or earns income from Kenya, even without a physical office in the country.

Failure to comply with a freezing or seizure order is a criminal offence. Licenced crypto operators that refuse to freeze assets, grant investigators access to premises where the suspected assets could be, or assist with the seizure and transfer of virtual assets can face fines of up to KES 5 million ($38,640), up to five years in prison, or both. Companies can be fined up to KES 8 million ($61,800).

The framework forms part of Kenya’s broader effort to align with global anti-money-laundering and counter-terrorism financing standards as it works to exit the Financial Action Task Force (FATF) grey list. Bringing crypto exchanges, wallet providers, and stablecoin issuers into a licencing and reporting regime supports one of FATF’s key recommendations: improving risk-based AML/CFT supervision of financial institutions by extending oversight to sectors that have historically operated outside the traditional banking space.

Kenya’s crypto market grew largely through peer-to-peer trading with limited regulatory visibility. Licencing exchanges and taxing digital assets is only part of the shift. Investigators can now treat the physical backups behind a wallet as evidence in their own right—searched for, seized, and used to secure the assets behind them—pushing Kenya toward one of the more aggressive crypto-enforcement regimes on the continent.

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