KENYA Law and Practice Contributed by: Keega Gakuua, Faith Njeri Njaggah and Alphonse Odido, Keega & Company Advocates
Prudential requirements These include maintaining unencumbered mini- mum capital, holding insurance coverage (including professional indemnity insurance of not less than KES500,000), keeping client assets segregated from operational funds at all times, and maintaining reserve assets equivalent to 100% of client liabilities. Conduct-of-business obligations These include “fit and proper” assessments for all directors and key personnel, AML/CFT compliance with seven-year record retention and suspicious transaction reporting to the FRC, real-time read-only access for regulators, cybersecurity measures under the Computer Misuse and Cybercrimes Act, and full consumer protection disclosures. 2.4 Token Issuance The Kenyan VASP framework imposes significant capital, disclosure and governance requirements on issuers. Under the Regulations, ICO and tokenisa- tion providers must meet minimum paid-up capital of KES200 million and liquid capital of KES40 million, while stablecoin issuers require KES500 million paid- up capital. A detailed white paper must be published before any marketing commences and the offering requires CMA approval including a 0.5% fee on the value of the successful offer. Issuers must be incorporated in Kenya (or registered as a foreign company), maintain a local physical office, pass “fit and proper” tests for directors and significant shareholders, and comply with AML/CFT obligations including seven-year record retention and suspicious transaction reporting to the FRC. A detailed white paper is the cornerstone of the dis- closure regime and must be published before market- ing begins, with company directors held personally accountable for its accuracy. The white paper must comprehensively outline: • the nature of the virtual asset; • the characteristics of the offering;
• risk factors (including price volatility, cybersecurity threats, and any conflicts of interest); • how user funds will be managed, and the rights of token holders (including redemption mechanisms where applicable); • the issuer’s registered office; • contact details, the licence number (once issued); and • a clear statement that the offering has received regulatory approval. CMA and CBK have the power to object to, reject, or require modifications to an offering if there are dis- crepancies between the white paper and the actual offering, if the advertising is misleading, or if the offer- ing deviates from the approved terms. 2.5 Market Abuse Framework to Combat Market Abuse and Insider Trading Kenya has introduced a framework to combat mar- ket abuse in the virtual asset space under the VASP Act and the Regulations. The framework explicitly prohibits market manipulation, including intention- ally inflating or deflating the price of a virtual asset through false orders, misleading statements, or creat- ing artificial trading volume (such as pump-and-dump schemes). Insider trading – that is, using material, non-public information related to a virtual asset or a VASP to acquire an unfair trading advantage for oneself or oth- ers – is also prohibited. Additionally, false trading or wash trading, through entering into transactions that do not involve a genuine change in beneficial owner- ship or creating a false appearance of active trading, is forbidden. To enforce these prohibitions, VASPs must conduct thorough due diligence before listing any virtual asset on their platform and implement systems for real-time or ongoing monitoring of trading activity to detect and flag suspicious patterns. Suspicious transactions, including potential market abuse, must be reported to the FRC. Non-compliance can lead to suspension or revocation of licences, and individuals involved in market abuse schemes may face criminal prosecution, with penalties including significant fines and imprison-
• the target investor base; • governance structures; • operational details;
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