KENYA Law and Practice Contributed by: Keega Gakuua, Faith Njeri Njaggah and Alphonse Odido, Keega & Company Advocates
traditional payment service providers are not subject to asset-specific reserve composition rules of this nature. 6.2.3 Backing Assets Composition of Backing Assets A stablecoin must be fully backed at all times by high- quality liquid assets (HQLA) denominated in Kenyan shillings. Eligible reserve assets are limited to: • cash (KES-denominated balances); • deposits with commercial banks or the CBK; • government securities with a residual maturity of 90 days or less; and • repurchase agreements with a maturity of no more than seven days, backed by cash or central bank deposits. The reserve basket cannot include long-dated bonds, illiquid assets, foreign-denominated securities as pri- mary backing, or any assets that are not immediately convertible to cash without significant loss of value. Location and Custody Restrictions Reserves must be segregated from the issuer’s own funds, held with an approved custodian, free from third-party claims, and available for immedi- ate redemption at par on demand. The regulations impose a local anchoring requirement: at least 30% of customer funds backing a stablecoin must be held in segregated accounts at commercial banks domiciled in Kenya. The remaining 70% may be held in the other permitted HQLA categories but must remain within Kenya and subject to CBK oversight. Prohibition on Interest or Yield The Regulations explicitly prohibit the payment of any interest or yield on stablecoins, including indirect yield routed through other licensed virtual asset busi- nesses (such as lending or yield-aggregator schemes
using the stablecoin as collateral). This prohibition is intended to keep stablecoins focused on payment util- ity rather than deposit‑like savings instruments, and to reduce run risks by eliminating expectations of return. Consequently, Kenya’s baseline is a non‑remunerat- ed, par‑value stablecoin, functionally closer to regu- lated e‑money than to interest‑bearing deposits or Kenya does not currently maintain a separate or dis- tinct set of requirements for stablecoins specifically designated as “systemic”. Instead, the draft VASP Regulations apply a single, unified set of stringent rules to all stablecoin issuers operating in or from Kenya, regardless of size, market share, or poten- tial systemic importance. This approach implicitly addresses systemic risk through a combination of high capital thresholds, strict reserve management, enhanced reporting obligations, and intensive over- sight by the CBK. money‑market‑linked tokens. 6.2.4 Special Considerations 7. Tokenisation and Real-World Assets 7.1 Treatment Tokenised real-world assets are regulated as virtual assets, subjecting them to the new VASP regime, with the regulatory trigger being the use of distributed ledger technology rather than the nature of the under- lying asset. By contrast, non-blockchain equivalents such as traditional securities or real estate investment instruments are regulated under the Land Act, Capital Markets Act or the Companies Act.
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