The Virtual Assets Service Providers Bill, 2024, (the “Bill”) is aimed at regulating the virtual assets sector in Kenya. Introduced by the National Treasury and Economic Planning, the Bill seeks to establish a framework for the oversight and development of virtual assets and their service providers. It mandates that Virtual Asset Service Providers (VASPs) obtain licenses and comply with stringent operational standards with the Capital Markets Authority designated as the primary regulatory body. This is aimed at promoting innovation while mitigating risks such as money laundering and terrorism financing.
Virtual assets, as defined in the Bill are digital representations of value that can be digitally traded, transferred or used for payment or investment purposes. This encompasses a wide range of assets, including cryptocurrencies like Bitcoin and Ethereum, utility tokens that provide access to specific services or platforms and security tokens representing ownership interests in assets or enterprises. The bill explicitly excludes digital representations of fiat currencies, e-money and traditional financial assets from its definition of virtual assets.
For businesses and individuals engaged in the virtual assets’ ecosystem, this Bill introduces several key changes. First, all VASPs will be required to obtain a license from the CMA ensuring only vetted and compliant entities operate in Kenya. Second, service providers will need to implement stringent anti-money laundering (AML) and counter-terrorism financing (CTF) measures including Know-Your-Customer (KYC) policies. Third, the Bill seeks to introduce reporting obligations to enhance transparency in virtual assets transactions. These measures will provide investors and businesses with a safer and more predictable environment for engaging with virtual assets.
The enactment of this Bill is poised to significantly transform Kenya’s virtual assets landscape. By instituting mandatory licensing and rigorous compliance measures for VASPs, the Bill aims to enhance transparency and security within the virtual assets market. For clients engaged in virtual assets transactions or considering investments in this space, understanding the implications of this legislation is crucial. Compliance with the new regulatory requirements will be essential to capitalize on the opportunities presented by a more structured and secure virtual assets environment.
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