Are Validators and Node Operators VASPs in Kenya?

Kenyans run blockchain validators, operate nodes, mine and offer staking services. None of these activities appears anywhere in the Virtual Asset Service Providers Act, 2025 or the Virtual Asset Service Providers Regulations, 2026. That does not mean they are all outside the regime. Some clearly are; some turn into licensable services once customer assets or customer funds are involved. This article sorts them out.

The starting point: only listed activities need a licence

Section 9 of the VASP Act limits permissible activities to those in the First Schedule, and section 8(2) only requires a licence for the business of virtual asset services. The First Schedule lists custodial wallet services, exchange, payment processing, brokerage, investment advice, portfolio management, virtual asset offerings, tokenisation, token issuance platforms and stablecoin issuance. Validating transactions, producing blocks, running a node and mining are not on the list.

That matches the international standard. Paragraph 83 of the Financial Action Task Force’s 2021 guidance on virtual assets says the FATF does not seek to regulate as VASPs persons who provide ancillary services to a virtual asset network, or who solely operate a network, so long as they do not also provide or actively facilitate covered services for others.

Activities that are generally outside the Act

Solo validators and miners. Someone who validates with their own assets and earns block rewards is not providing a service to customers. There is no client whose assets are held, exchanged or transferred.

Node and infrastructure operators. Running a full node, an archive node or an RPC endpoint that relays data is infrastructure. On its own it is not exchange, custody, brokerage or payment processing.

Hardware and software wallet makers. Paragraph 83 of the FATF guidance treats providers of unhosted wallets and hardware wallets as ancillary. Under section 2 of the Act, a wallet is only custodial where a third party holds and manages the private keys, which an unhosted wallet provider does not.

Activities that can cross the line

Custodial staking services. A business that takes customers’ tokens into wallets it controls and stakes them on their behalf holds the customers’ private keys. That is a custodial wallet service, licensed by the Central Bank of Kenya. Section 31 and Part VIII of the Regulations then apply in full: segregation of customer assets, regular reconciliation, and a bar on lending, hypothecating or otherwise encumbering assets held for safekeeping (regulation 66).

Pooled staking for a return. Where a provider pools customer assets and manages them to generate rewards, the arrangement can resemble portfolio management on a discretionary basis, which the First Schedule assigns to the Capital Markets Authority as a virtual asset manager. Fifth Schedule capital for a virtual asset manager is KES 20 million.

Liquid staking tokens. Some services give customers a token representing their staked position. Section 2 defines a virtual asset offering as a method of raising funds where an issuer issues virtual assets and offers them in exchange for funds, and section 34 requires approval before any offering in or from Kenya. Whether a liquid staking token is such an offering depends on its terms, but issuers marketing to Kenyans should take the question seriously.

Validators who also operate services. A validator that also runs an exchange, a bridge with custody, or a staking front-end for others is regulated for those services, not for validating.

The economic-benefit trap

Regulation 4(2) of the Regulations deems a person to operate in or from Kenya where it derives an economic benefit or income from Kenya. Read with a broad view of what counts as a virtual asset service, that limb could be stretched to reach a foreign validator whose rewards partly come from fees paid by Kenyan users. We do not think that is the right reading. Regulation 4 decides where a person operates, not whether what it does is a virtual asset service. If validation is not a listed activity, the territorial test never bites. The point has not been tested, and operators with Kenyan links should keep their position documented.

AML exposure even outside the Act

Falling outside the licensing regime does not take a validator outside the criminal law. The Proceeds of Crime and Anti-Money Laundering Act still prohibits dealing with proceeds of crime, and Part XIV of the Regulations allows freezing and seizure orders to be made against virtual assets held by licensees. A validator that knowingly processes transactions for sanctioned or criminal actors faces the same risks as anyone else who handles the proceeds.

A practical checklist

1. Do you hold anyone else’s private keys, even briefly? If yes, you are likely a custodial wallet provider.
2. Do you pool and manage others’ assets for a return? If yes, consider the virtual asset manager category.
3. Do you issue a token to customers representing their stake? If yes, consider section 34.
4. Do you charge Kenyan users fees for a service beyond validation? If yes, regulation 4 likely applies to that service.

If every answer is no, you are probably running network infrastructure, not a virtual asset service.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.