KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Sara Ndei, Cliffe Dekker Hofmeyr incorporating Kieti Law LLP
9. Regtech 9.1 Regulation of Regtech Providers Regtech providers are unregulated in Kenya. However, the evolving regulatory landscape in Kenya creates an opportunity for the introduc - tion of regtech solutions such as automated compliance systems that monitor transactions in real-time, detect anomalies, ensure adherence to local regulations, and generate necessary reports for regulatory bodies. 9.2 Contractual Terms to Assure Performance and Accuracy There are no established practices on regtech in Kenya. 10. Blockchain 10.1 Use of Blockchain in the Financial Services Industry Kenyan financial institutions have explored use cases for blockchain in the operations and sought regulatory approval for blockchain-linked products. However, there is a lack of information available to ascertain the uptake of blockchain technology. 10.2 Local Regulators’ Approach to Blockchain Kenya has made significant strides in regulating blockchain technology and virtual assets. The VASPs Bill defines blockchain as “a digital ledg- er or database of transactions relating to virtual assets which are recorded chronologically, and which are capable of being audited” . This defini - tion underscores the government’s recognition of blockchain’s role in ensuring transparency and security in digital transactions.
The VASPs Bill designates both the CBK and the CMA as key regulatory authorities for vir - tual assets. The CBK will oversee crypto service providers offering payment and currency-related solutions, while the CMA will regulate entities involved in trading, exchange and initial pub - lic offerings of virtual assets. This collaborative approach signifies a shift from previous caution towards a more structured engagement with the crypto industry. 10.3 Classification of Blockchain Assets Blockchain assets (hereinafter virtual assets) are not considered a form of regulated financial instrument in Kenya. However, the draft VASPs Bill seeks to provide the regulation of virtual assets, which are defined as “any digital rep- resentation of value that can be digitally traded or transferred and can be used for payment or investment purposes and does not include digi- tal representation of fiat currencies, e-money, securities and other financial assets” . However, the following types of assets are excluded from regulation under the VASPs Bill: • digital representations of value or rights that operate within a closed ecosystem of the issuer, including those that are: (a) non-transferable outside a closed eco - system; (b) non-exchangeable with real-world goods, services, discounts or purchases outside a closed ecosystem; (c) non-tradeable onwards on the secondary market outside of the closed ecosystem; (d) non-saleable on a secondary market out - side of the closed-loop system; (e) non-usable for payment or investment purposes; and (f) non-exchangeable for fiat-currency; • digital representations of fiat currencies, securities and other financial instruments to
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