How are crypto assets defined in your jurisdiction?
There is no regulatory framework governing crypto assets in Kenya and as such, we do not have a legislated definition of crypto assets.
TerraLex Cross-Border Guide to Crypto Assets
Welcome to the Terralex cross-border guide to crypto assets
Crypto assets have come to the forefront of society quickly. In an area where technology has surpassed the law in many jurisdictions, this guide aims to provide a current snapshot of the legal status of crypto assets around the world, current regulations, and forthcoming or proposed legislation.
Special thanks to Martin Sloan (Brodies) as well as the leaders of the TerraLex Technology & Digital Business Industry Sector Team and Finance & Banking Practice Group for developing the questions for this guide.
How to Use: You can use the tools below to create bespoke reports for the jurisdiction(s) and topic(s) covered. Click into single jurisdiction for one location or use the compare tool to compare multiple jurisdictions. Select the jurisdictions and topics of interest to create your unique report. You also have the option to print or download using the ellipsis button in the top right corner.
Kenya TerraLex Cross-Border Guide to Crypto Assets Guide
- Authors:
- Christopher Kiragu, Ivy Milgo
- Date posted:
- 06/06/2023
- Last update:
- 06/06/2023
Guidance
What is the legal status of crypto assets in your jurisdiction?
The position is unclear as crypto assets are not regulated nor have they been prohibited. However, the Central Bank of Kenya (CBK) issued a cautionary notice to the public on virtual currencies such as bitcoin. In the notice, the CBK indicated that virtual currencies are not legal tender in Kenya and that no protection exists in the event that the platform that exchanges or holds the virtual currency fails or goes out of business.
Are crypto assets regulated in your jurisdiction?
Crypto assets are not regulated neither have they been prohibited however, financial sector regulators such as the Central Bank of Kenya (CBK) and the Capital Markets Authority of Kenya have addressed the issue of crypto assets in Kenya. The CBK issued a cautionary notice to the public on virtual currencies such as bitcoin and other similar products. In the notice, the CBK reiterated that virtual currencies such as bitcoin are not legal tender in Kenya and that no protection exists in the event the platform that exchanges or holds the virtual currency fails or goes out of business. The Capital Markets Authority (Authority) published a draft stakeholders consultative paper on policy framework for implementation of a regulatory sandbox to support fintech innovation in Kenya. In this paper, the Authority acknowledges that crypto currency is a capital market based fintech innovation and proposes a regulatory sandbox to support fintech innovation in Kenya.
If crypto assets are regulated in your jurisdiction, which key regulatory authorities are responsible for the regulations and their enforcement in your jurisdiction? How are they regulated?
Crypto assets are not regulated in Kenya and there is no designated authority in charge of regulating crypto assets in Kenya. Nevertheless, financial sector regulators such as the Central Bank of Kenya and the Capital Markets Authority have addressed the issue of virtual currencies. The Central Bank of Kenya (CBK) issued a cautionary notice to the public on virtual currencies such as bitcoin. In the notice, the CBK indicated that virtual currencies are not legal tender in Kenya and that no protection exists in the event that the platform that exchanges or holds the virtual currency fails or goes out of business.
The Capital Markets Authority (Authority) published a draft stakeholders consultative paper on policy framework for implementation of a regulatory sandbox to support fintech innovation in Kenya. In this paper, the Authority acknowledges that crypto currency is a capital market based fintech innovation and proposes a regulatory sandbox to support fintech innovation in Kenya.
Have specific anti-money laundering measures been introduced in relation to crypto asset activities in your jurisdiction?
No, specific anti-money laundering measures have been introduced in relation to crypto asset activities.
How is the use of blockchain in the financial services sector regulated in your jurisdiction?
There is no specific legislation on the use of blockchain in the financial services sector.
How are crypto assets taxed in your jurisdiction?
There is currently no legislation governing the taxation of crypto assets in Kenya. However, there are ongoing discussions around the possible taxation of crypto exchanges.
Are crypto assets recognized as a type of property in your jurisdiction?
As there is no regulatory framework governing crypto assets in Kenya, it is still unclear whether crypto assets are legally recognised as property.
How does your jurisdiction deal with the application of property laws to intangible assets and conflicts of laws with other jurisdictions
As there is no regulatory framework governing crypto assets in Kenya, it is still unclear whether crypto assets are legally recognised as property capable of being transferred. Generally, Kenyan law recognises the transferability of various intangible assets such as shares and intellectual property.
can smart contracts transferring ownership on a crypto asset be treated as legally binding in your jurisdiction?
There is no regulatory framework governing crypto assets in Kenya and smart contracts are also not specifically addressed in existing legislation. However, if a smart contract satisfies all the requirements of a valid contract under Kenyan law, it can be treated as legally binding by a court of law.
Is it possible to take security over a crypto asset in your jurisdiction? If so, please provide a brief overview.
As there is no regulatory framework governing crypto assets in Kenya, it is still unclear whether it is legally possible to use crypto assets as security.
Does inheritance tax relief exist in your jurisdiction for situations where fluctuations in the market result in a beneficiary paying disproportionate tax?
No.
Is there any forthcoming or proposed legislation in your jurisdiction relating to crypto assets?
There is no published bill/proposed legislation on the regulation of crypto assets but financial sector regulators such as the Central Bank of Kenya and the Capital Markets Authority have indicated intention to develop a regulatory framework on crypto assets. There are also ongoing discourses around the possible taxation of crypto exchanges.
Is there a supranatorial view on crypto assets in your region and if so, what is it?
The East African Community has not yet developed a unified framework on the regulation of crypto assets in the region. Member states have therefore had to develop independent regulatory frameworks dealing with crypto assets.
Is there anything else that you think is unusual or different about how your jurisdiction treats crypto assets or dealings in crypto assets?
No, the trend around regulation of virtual currencies across the globe has almost been the same because rapid technological innovations often move faster than the law and the law plays the role of catching up. We also note various countries are exploring the possibility of creating central bank digital currencies and the Central Bank of Kenya recently published a discussion paper on a central bank digital currency (CBDC) which considers the applicability of CBDC.
Disclaimer: This guide contains summaries of general principles of law. It is not a substitute for specific legal advice and should not be relied upon in relation to the application of the law or subject matter covered.