KENYA Law and Practice Contributed by: Keega Gakuua, Faith Njeri Njaggah and Alphonse Odido, Keega & Company Advocates
Transfer of Ownership Under Kenya’s VASP Act, 2025, the transfer of own- ership of crypto-assets is determined by control of private keys in peer-to-peer transactions, while assets held on licensed exchanges or custodial wallets rely on the off-chain records of licensed VASPs, which are subject to KYC obligations and seven-year record retention requirements. Courts may compel transfers through orders directed at VASPs or, in the case of non-custodial assets, through asset forfeiture pro- ceedings under Kenya’s Proceeds of Crime and Anti- Money Laundering Act (POCAMLA) and the Computer Misuse and Cybercrimes Act. For tokenised real-world assets, ownership is deter- mined by a hybrid approach reconciling the on-chain token ledger with off-chain legal registries, with the Environment and Land Court having jurisdiction to resolve conflicts and order VASPs to adjust token holdings. Legal Issues Relating to Use of Digital Assets in Collateral Arrangements There are significant legal and regulatory issues relat- ing to the use of digital assets in collateral arrange- ments in Kenya, primarily because the Movable Property Security Rights Act (MPSRA), 2017 has not yet been amended to explicitly include virtual assets as a recognised form of intangible movable prop- erty. While the MPSRA defines “movable assets” to include “intangible assets” such as receivables, deposit accounts, and “electronic securities”, the VASP Act, 2025 explicitly excludes “digital represen- tation of securities and other financial assets” from the definition of virtual assets. This creates operational ambiguity: if a crypto-asset or tokenised asset is not classified as a “security”, it may not qualify for regis- tration as an “electronic security” under the MPSRA, yet there is no separate registry for virtual assets as collateral. Consequently, lenders cannot perfect a security inter- est over digital assets with third-party effectiveness, meaning that without an express amendment to the MPSRA or a new regulatory framework from the CMA, the enforceability of collateral arrangements over crypto-assets remains legally uncertain and untested in the Kenyan courts.
The Office of the Data Protection Commissioner (ODPC) has the power to investigate breaches and levy fines, and the Worldcoin decision serves as a clear warning that data protection provisions will be aggressively enforced against blockchain-based ser- vices processing personal data in Kenya. 1.1.4 Smart Contracts Smart contracts can be enforced in Kenya, but their enforceability is not yet settled by direct judicial prec- edent. Instead, they must fit within the existing frame- work of contract law, which is technology-neutral and The Virtual Assets Association of Kenya (VAAK) brings together industry, regulators and partners to build Kenya’s virtual assets ecosystem responsibly. It co- ordinates standards, facilitates dialogue, and con- nects Kenya to global best practices. 1.2 Crypto-Assets 1.2.1 Property Considerations Crypto-Assets as a Form of Property centred on traditional principles. 1.1.5 Industry and Trade Bodies Crypto-assets are treated as a form of property in Kenya. The VASP Act explicitly recognises virtual assets as property, defining them as “a digital rep- resentation of value that can be digitally traded or transferred”. This statutory classification brings vir- tual assets under the umbrella of movable property as defined in the Interpretation and General Provisions Act (Cap 2), establishing them as legally recognised assets capable of being owned, transferred, inherited, and subjected to court orders. Prior to the VASP Act, crypto-assets existed in a legal vacuum with no clear property status. Enforcement of property rights differs from tangi- ble property primarily in the mechanisms available: courts issue orders directed at licensed VASPs as intermediaries rather than directly against the assets themselves, and proof of ownership requires technical evidence of private key control or exchange records rather than physical possession or registration. Own- ership claims are dealt with through contractual evi- dence, VASP records, court orders, and, for tokenised real-world assets, a hybrid approach addressing both on-chain and off-chain legal frameworks.
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