HIGHLIGHT OF THE VIRTUAL ASSETS SERVICE PROVIDERS BILL,2025: KENYA
In January 2025, the National Treasury and Economic Planning published the Virtual Assets Service Providers Bill, 2025 and invited members of the public to submit their comments on the bill by 24th January 2025 and before the bill is submitted to Parliament for debate.
At a glance, below are the key provisions of the Bill:
Objective
The objects of the bill are to:
- Establish virtual assets service providers and issuers of initial virtual asset offerings in Kenya;
- Provide mechanism for licensing of virtual assets service providers;
- Provide mechanism for approval of issuance of initial virtual asset offering; and
- regulate any other auxiliary or connected matter to virtual assets.
Definition of Virtual Assets and Virtual Asset Services
Under the Bill:
Virtual asset is defined to mean a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes and does not include digital representation of fiat currencies, e-money, securities and other financial assets. and
Virtual Asset Services mean the following services: Virtual Asset Wallet Provider, Virtual Asset Exchange (Transfer, Conversion & Trade/clearing/settlement), Virtual Asset Payment (Payment Gateway), Virtual Asset Brokerage services, Virtual Assets Investment Advisory, Virtual Asset Management, Initial Virtual Asset Offering, Virtual Asset Escrow Service andVirtual Asset Validation/ Administration/ Mining.
Regulatory and Supervisory Authorities
The bill proposes to vest the regulatory mandate and supervision of Virtual Asset Service Providers on the Central Bank of Kenya (CBK), Capital Markets Authority (CMA), Communication Authority (CA) and any other body as the Cabinet Secretary for National Treasury may determine and publish in the Kenya gazette.
Mandate of the Regulatory Authorities
Under the bill, the Regulatory and supervisory Authorities are mandated to undertake the following:
- To license virtual asset service providers.
- To approve issuance of initial virtual asset offering.
- To approve the registration of a scheme involving an initial virtual asset offering.
- To regulate, supervise and monitor promoters of an initial virtual asset offering.
- To regulate activities relating to the provision of virtual asset services.
- To issue directions, directives and take such enforcement actions, as may be deemed necessary, for non-compliance with the Act.
- To issue and publish notices, guidelines, guidance notes and any other similar instrument regarding the implementation of the Act, regulations or code issued under the Act.
- To provide feedback to virtual asset service providers and promoters of initial virtual asset offering to assist them in detecting and reporting suspicious activity and application of measures to combat money-laundering and financing of terrorism.
- To ensure financial soundness and stability of the financial system.
- To advise the Cabinet Secretary on all matters relating to virtual asset services in their respective sectors. And
- To cooperate with supervisory bodies, competent authorities and investigating authorities on sharing and exchange of relevant information.
Prohibition
If adopted as is and passed into law, the bill has the following prohibition:
- A person shall not carry on, or purport to carry on, the business of virtual asset services, or hold itself out as carrying on that business, in or from Kenya, unless that person is licensed to do so by the relevant regulatory authority (CBK, CMA or CA) under the Act. By a person it includes both a local company or a foreign company registered under the Companies Act No.17 of 2015 Laws of Kenya.
- A natural person shall not carry on, or purport to carry on, in or from within Kenya, the business of virtual asset services
Penalty
A person who commits the offence by providing virtual asset services without a licence is liable on conviction (a) in the case of an individual, to a fine not exceeding ten million Kenya shillings or to imprisonment for a term not exceeding ten years or both (b) in the case of a company, to a fine not exceeding twenty million shillings.
Requirements for Licensing as a Virtual Asset Service Provider
Under the bill, A person intending to carry on the business of virtual asset services shall submit an application for a licence to the relevant regulatory authority in compliance with such requirements as may be prescribed and accompanied by the prescribed application fee. (The prescription and fees shall be set out in the Regulations to the issued upon coming into force)
Other Mandatory requirements
- A virtual asset service provider must maintain a registered office in Kenya.
- the business and affairs of a licensee must be managed by a board of directors consisting of at least two directors.
- The board of directors of a licensee must comprise of natural persons only and a director must not serve in more than one board.
- A licensee must conduct its business in a prudent manner.
- A Virtual Asset Service Provider must conduct its business with integrity at all times.
- A virtual asset service provider shall at all times maintain its business in a financially sound condition by complying with such capital, solvency and insurance requirements as may be prescribed.
- Have adequate technological, financial and human resources to discharge its services.
- comply with the full range of AML/CFT/ CPF preventive measures, including targeted financial sanctions obligations.
- Open and operate a bank account in Kenya.
- Comply with data protection and consumer protection laws.
- plan for business continuity and disaster recovery.
- Have comprehensive complain handling mechanism.
- A virtual asset service provider must appoint or designate a person as a chief executive officer, who shall be responsible for the day-to-day management of the virtual asset service provider in Kenya.
Factors to be considered by the regulatory and supervisory authorities before granting the license
The bill provides the following factors to be considered before granting the license:
- Whether or not the applicant is an eligible person.
- Whether the applicant has personnel with the necessary skills, knowledge and experience.
- Whether the applicant is capable of complying with consumer protection and data protection requirements.
- Whether the applicant is capable of complying with any financial obligations, inclusive of insurance, capital and solvency requirements.
- Whether the applicant’s directors, principal officers and any other person meets the fit and proper test.
- Whether the applicant meets the prescribed cyber security measures.
- Whether the applicant has specified premises or data solutions that the relevant regulatory authority deems suitable for accessing and retaining records and other documents.
- satisfies the relevant regulatory authority that an approval is in the public interest.
- The size, scope and complexity of the virtual asset service, underlying technology, method of delivery of the service and virtual asset utilization.
- The knowledge, expertise and experience of the applicant.
- The procedures that the applicant has in place to combat money laundering, terrorist financing and proliferation financing.
- The internal safeguards and data protection systems being utilized by the applicant.
- The risks that the virtual asset service may pose to clients, other licensees or to the financial systems in Kenya.
- The net worth, capital reserves and financial stability of the applicant.
- The impact that the virtual asset service may have on the financial services in Kenya.
- The likelihood that the service shall promote innovation, competition and benefits to consumers.
- the applicant’s beneficial owners are fit and proper persons to have such ownership or control. And
- any other consideration that the relevant regulatory authority may require.
It is also important to note that under the Bill, A licence granted therein shall not be transferred or assigned without prior written approval of the relevant regulatory authority.
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