KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Valere Nyaboke, Cliffe Dekker Hofmeyr
10.8 Cryptocurrency Derivatives Certain cryptocurrency derivatives activities are reg - ulated under the VASPA. The legislation provides a broad definition of “virtual asset services”, which may encompass several types of activities related to cryp - tocurrency derivatives. • Platforms for Trading and Exchange – cryptocur - rency derivative trading platforms that facilitate transactions – including clearing and settlement functions – would likely fall within the regulatory scope of the VASPA. • Custodial Wallet Services – entities that hold cryp - tocurrency assets on behalf of clients participating in derivative transactions (such as for collateral management) would also be required to obtain licensing under the VASPA. 10.9 Decentralised Finance (DeFi) There is currently no regulation on DeFi in Kenya. 10.10 Regulation of Funds There are currently no regulations governing how funds can invest in virtual assets. For fund manag - ers licensed under the Capital Markets Act and the Retirement Benefits Act to invest in virtual assets, the investment guidelines outlined within these regulato - ry frameworks would need to be amended to permit investment in blockchain‑based assets. 10.11 Virtual Currencies Virtual currencies are not currently expressly defined under Kenyan law. However, the Finance Act introduc - es a digital asset tax that applies to income derived from the transfer or exchange of a “digital asset”. The Finance Act, 2025 defines a “digital asset” to include “anything of value that is not tangible, includ - ing cryptocurrencies, token code, or numbers held in digital form and generated through cryptographic means or otherwise, by whatever name called, provid - ing a digital representation of value exchanged with or without consideration that can be transferred, stored or exchanged electronically”. This definition encom - passes virtual currencies, meaning that any gains from the exchange of virtual currencies are subject to tax in Kenya.
Under the VASPA, virtual currencies fall within the broader definition of virtual assets. Accordingly, there is no distinction between the treatment of virtual cur - rencies and other types of virtual assets. 10.12 NFTs There is currently no regulatory framework in place for NFTs or NFT platforms. However, the VASPA provides for the regulation of NFTs issued by VASPs in Kenya and identifies specific categories of NFTs that are excluded from regulation. These exclusions apply to: • NFTs that are not used for payment, investment, or any other financial purposes; and • NFTs that, by their nature and function – rather than the designation given by their issuer – are not used for payment or investment purposes and do not constitute a digital representation of any finan - cial asset. 10.13 Stablecoins Stablecoins are expressly regulated under the VAS - PA, which both defines “stablecoin” and designates “stablecoin issuance” as a regulated virtual‑asset activity. Any person issuing or otherwise carrying on in‑scope virtual‑asset services in or from Kenya must be licensed as a VASP. Responsibility for the over - sight of stablecoin issuance sits with the CBK, while trading‑ and markets‑facing activities elsewhere in the value chain are overseen by the CMA under the Act’s allocation of responsibilities. At present, the VASPA sets out the licensing perim - eter and the core conduct and prudential obligations applicable to all VASPs – including stablecoin issu - ers. These obligations include fit‑and‑proper govern - ance requirements, maintaining a physical presence in Kenya, prudent business conduct, audited financial statements, robust cybersecurity controls, and com - prehensive AML/CFT/CPF compliance. Client asset protection duties are already in force: a licensee must segregate client virtual assets from its own property, maintain sufficient quantities of each virtual asset to meet its obligations to customers, and ensure that client assets are not subject to claims by the licen - see’s creditors. The VASPA also provides for capital, solvency, liquidity, and insurance requirements to be
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