Some crypto startups are raising red flags over the Virtual Asset Service Providers (VASP) Bill, warning that a Binance-linked lobby group could seize control of a proposed regulatory body, tilting the playing field toward monopoly under the guise of reform.

“All regulation convos by VAC that happened recently have been sponsored by Binance. Then VAC, a private consulting entity, with a non-compete with Binance ‘magically’ gets a regulatory seat? How is this fair? How is this constitutional?” one of the industry stakeholders lamented.

A confidential agreement between Binance and the Virtual Asset Chamber of Commerce (VAC) lends weight to concerns raised by crypto startups that the two entities are working in lockstep to shape Kenya’s digital asset regulations. The document outlines a paid policy retainer of US$6,000 per country per month, under which the Chamber commits to strategic advocacy, regulatory engagement, and the drafting of model frameworks, all while providing Binance with regular updates and influence over key activities.

Startups argue this arrangement blurs the line between independent lobbying and private capture, especially as VAC has positioned itself for a seat at the table in the proposed oversight body.

“If VAC remains an open and collaborative platform, at the same time, VAC claims to be a private consulting company, how did VACC gain the same equal standing as the Governor of the Central Bank of Kenya and other govt regulators, as a private entity with global players such as Binance and Circle publicly documented as VACC clients/ members?” inquired a stakeholder.

Binance, the world’s largest cryptocurrency exchange by trading volume, has long drawn scrutiny from regulators over its opaque corporate structure, compliance lapses, and aggressive global expansion. The company has faced enforcement actions in multiple jurisdictions including the United States, Nigeria, and the United Kingdom, for allegedly operating without licenses and failing to stem money laundering.

While Binance remains a dominant player in emerging markets, critics argue its market power allows it to shape regulations in its favor, often at the expense of smaller, localized competitors and regulatory independence. The crypto startups have also pinpointed that if Binance monopolizes policy formulation in Kenya, there are risks that the country’s oversight capacities will be further weakened.

“If an entity of poor international reputation or one with clear conflict of interest becomes our crypto regulator, Kenya shall never leave FATF and EU greylists,” another stakeholder said.

The Virtual Asset Chamber of Commerce (VAC) is touting Parliament’s adoption of its key proposals as validation of its role as the digital asset industry’s leading policy voice in Kenya. Citing a two-year campaign that included constitutional litigation, legislative engagement, and technical consultations with entities ranging from the IMF to the Central Bank, the Chamber argues that its success in replacing a 3% transaction tax with a 10% levy on service fees, and seeing over 90% of its proposals adopted in the Virtual Assets Bill.

“For two years, the VAC has been the primary body providing relevant and consistent feedback on policy conversations in the country,” VAC’s director Basil Ogolla told The Kenyan Wall Street in an email.

“The National Assembly’s decision to include VAC as a nominator in the regulatory board reflects the trust and confidence built through this track record of meaningful engagement. This was not a result of exclusivity or exclusion, but rather a recognition of sustained effort, professionalism, and collaboration,” Ogolla added.

However, several crypto players have claimed that VAC’s claim to wider industry representation is suspect and they fear that when it holds the regulatory reins, it will skew the rules in favor of its clients. The startups have also pointed out that VAC has employed the same strategy to ‘slither its way’ into Rwanda’s regulatory conversation to create an unfair advantage for its partners in the market.

The Virtual Assets Council (VAC) says its broad-based membership and open structure ensure inclusive representation in the proposed regulator, VARA. Its board nominee will be member-elected, with decisions made collectively to avoid conflicts of interest or undue influence.

“Our membership is not exclusive to global players; the VAC has local and regional members and is open to membership from all interested parties. The proposed inclusion of VAC is designed to provide a unified voice within a broader body,” Ogolla added.

The country’s push to regulate the digital asset industry comes after years of explosive crypto adoption in a largely unregulated environment; an era that brought innovation but also exposed consumers to scams and legal uncertainty. The Kenya Revenue Authority reported collecting KSh 10 billion from crypto dealers in just one year under the now-repealed Finance Act 2023, a signal of the market’s scale and growing entanglement with the broader economy.

Yet without a legal framework, regulators like the Central Bank and Capital Markets Authority have operated in a vacuum, even as foreign exchanges, stablecoins, and P2P platforms gained traction across the country.