KENYA Law and Practice Contributed by: Keega Gakuua, Faith Njeri Njaggah and Alphonse Odido, Keega & Company Advocates
Operational infrastructure Technology systems must be production-ready at the application stage (prototypes are not accepted). Servers and data systems must support real-time transaction recording and seven-year record reten- tion. Asset segregation Consumer virtual assets must be segregated from the VASP’s operational funds at all times (strictly enforced). Local Personnel and Governance Requirements The framework mandates that key decision-makers be anchored in Kenya and subject to regulatory vet- ting. Board of directors A minimum of three directors is required. At least one third must be independent (non-executive). Key management personnel A CEO, compliance officer (AML/CFT expertise), and internal auditor must be appointed. “Fit and proper” test All directors, the CEO, compliance officer, senior offic- ers, significant shareholders (≥10% ownership), and beneficial owners must all be tested. Criteria: Regulators assess probity (police clearance), competence (CV/qualifications), and financial sound- ness. Shareholding cap (the 33.33% rule) For exchanges, stablecoin issuers, and wallet provid- ers, no single person may control more than 33.33% of voting rights, shares, or board appointments with- out regulatory pre-approval. Prudential Capital Requirements Capital must be unencumbered (not borrowed, loaned, or subject to liens). Stablecoin issuers Stablecoin issuers face the highest requirement with paid-up capital of KES500 million and liquid capital
Capital raising: Paid-up capital must be unencum- bered cash and must be deposited/available prior to application. Step 3: Submission Application fee: Generally KES100,000 (KES20,000 for advisers). Fees are non-refundable if the application is with- drawn or rejected. Document submission: The following should be sub- mitted to the relevant regulator (the CBK or CMA) – the second schedule application form, incorporation documents, the KRA PIN, the requisite mandatory documents, and audited financials. Step 4: Regulatory review and interview The regulator may require an in-person interview with directors and senior officers to assess their “fit and proper” status. The regulator assesses financial integrity, AML/CFT capability, and technology infrastructure. Step 5: Approval and licensing Upon approval, the licence fee must be paid (eg, exchanges pay a licence fee of KES1 million). Licences are typically valid for one year (expiring 31 December) and must be renewed annually. Substance Requirements (Local Presence) Substance requirements are strict and non-negotia- ble. Legal incorporation The entity must be a company limited by shares incor- porated in Kenya under the Companies Act, 2015 (for- eign companies must register a local subsidiary). Physical office A registered physical address in Kenya with suitable premises for record-keeping is mandatory. Virtual offices are unlikely to suffice.
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