KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Valere Nyaboke, Cliffe Dekker Hofmeyr
the Capital Markets Authority and include the follow - ing. • Securities exchange – a formal marketplace where various securities are bought, sold, or exchanged. Tradeable securities on an exchange include shares, debt securities, government securities, warrants, options, futures, units in a collective investment scheme (CIS), depository receipts, and asset‑backed securities. • Derivatives exchange – a CMA‑licensed securities exchange specifically designed for the listing and trading of exchange‑traded derivative contracts. These are standardised financial instruments whose value is derived from underlying assets, indices, or interest rates. • Commodities market – a regulated marketplace – licensed by the CMA or an equivalent author - ity – that facilitates the buying, selling, or trading of commodity contracts. Trading can take place physically or electronically. Tradeable commodities include agricultural, livestock, fishery, forestry, min - ing, or energy goods, as well as related manufac - tured or processed products, financial instruments, indices, and rights or interests linked to such com - modities. • Over‑the‑counter (OTC) securities exchange – a decentralised market in which securities not listed on a formal exchange are traded directly between participants, usually through a broker‑dealer network. OTC markets are typically less regulated than traditional exchanges. • Online foreign exchange platforms – internet‑based systems operated by online foreign exchange bro - kers that enable the trading of foreign currencies, including contracts for difference (CFDs) based on foreign underlying assets. 6.2 Regulation of Different Asset Classes The different assets tradable on the platforms and marketplaces listed in 6.1 Permissible Trading Plat- forms are regulated under the Capital Markets Act and the regulations issued pursuant to it. The regulations issued under the Capital Markets Act in relation to derivatives, asset‑based securities, commodities, and CFDs set out the requirements for how these assets should be traded on their respective
exchanges and platforms, as well as the obligations of market intermediaries when dealing with such assets. 6.3 Impact of the Emergence of Cryptocurrency Exchanges The VASPA establishes a regulatory framework for cryptocurrency exchanges in Kenya, with a primary focus on centralised exchanges. Supervisory respon - sibility is broadly divided between the CMA, which oversees trading‑related activities, and the CBK, which regulates payment‑like services and stablecoin‑relat - ed activities. The overarching objective of the regime is to integrate exchanges into the formal financial system, enable lawful banking relationships, ensure compliance with anti‑money‑laundering requirements, and strengthen standards of cybersecurity, consumer protection, and market integrity. VASPA defines a “virtual asset trading platform” as a digital platform that, for a fee or other economic benefit, enables third‑party trading of virtual assets for fiat currency or other virtual assets, and that either (i) holds or controls client virtual assets in order to facilitate such trades, or (ii) intermediates matched trades by purchasing virtual assets from sellers and selling them to buyers. This definition is intentionally structured to capture the core operational features of centralised exchanges. The legislative and policy materials underpinning VAS - PA focus on the licensing and supervision of identifia - ble “exchanges” and “virtual asset service providers”, thereby creating clear regulatory hooks for central - ised intermediaries. However, VASPA provides limited clarity on the regulatory challenges posed by offshore operators and non‑custodial, decentralised exchange (DEX) models. In practice, platforms that interface with Kenyan users on a business basis – particularly where they provide custody of assets, operate order books, offer fiat on‑ or off‑ramps, or actively market into Ken - ya – are likely to fall within the scope of VASP licens - ing expectations. By contrast, purely protocol‑level DEX activity raises more complex questions regarding regulatory reach and supervision, which are likely to be addressed gradually through guidance, enforce - ment practice, and the regulation of adjacent service providers.
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