The Capital Markets Authority (CMA) is working towards minimising the risks associated with trading in virtual assets by setting up a special fund to compensate investors in the event that a licensed dealer fails to meet its contractual obligations, signalling the government’s push to position the country as a digital finance hub on the continent.
CMA Chief Executive Wycliffe Shamiah told The EastAfrican in an interview that discussions are ongoing aimed at protecting investors who buy and sell virtual assets from losses through a compensation mechanism defined by a special fund, which would be distinct from the current Investor Compensation Fund (ICF) for equity investors.
“…the current fund (ICF) can pay investors when brokers or investment banks go under, but people felt that we now have many players who are like brokers. So those are the different discussions we are having,” said Mr Shamiah.
“There are discussions to bring on board more players. For example, one of the discussions which we know would be separate is the issue of virtual assets. There, again, we have players who may also require some kind of support in terms of compensation in case these companies (virtual asset companies) go under. So it is a discussion, but this may not be in the ICF as we know it; perhaps it could be another outfit.”
A virtual or digital asset is any content or resource stored digitally which has value and can be owned, traded or managed, and includes financial assets such as cryptocurrencies and digital tokens that are secured on technologies like blockchain.
Read: Free for all in crypto market scares investors
President William Ruto signed the Virtual Asset Service Providers (VASP) Act 2025 into law on October 15 last year, establishing a comprehensive legal framework for cryptocurrency regulation.
The CMA says the compensation mechanisms for equity and virtual asset investors will be separated because they involve different players and products, adding that details on the operations of the proposed compensation fund for virtual asset investors, including funding sources, are still under discussion.
“You know, those are purely different markets (the equity market and the virtual asset market). We have the normal capital markets, but virtual assets are new creations, so the discussions we are having are about what layers of protection we can have in their cases and whether a fund can be set up for that purpose. That is a discussion we need to have at some point, but I don’t think we want to mix them because these are two different markets,” said Shamiah.
“Even if they (equity and virtual asset markets) are under our regulations, we will most likely recommend that we have a separate fund which can cater for them. But you realise we are just starting that market, so as we grow, those are the issues we will be discussing. We don’t think we will have them (the virtual asset market) provided for in the current Investor Compensation Fund (ICF) because that fund has specific sources and specific players, and of course the players are also very different.”
Currently, stock market investors who suffer pecuniary loss as a result of the failure of a licensed broker or dealer to meet their contractual obligations are compensated out of the Investor Compensation Fund (ICF) set up by the CMA. The maximum compensation for each investor currently stands at Ksh200,000 ($1,550.38).
The ICF derives its income from interest accruing on funds received from subscribers to public issues between the day of closing the issue and the day refunds are made, as well as 0.01 percent of the consideration from the sale and purchase of shares through the Nairobi Securities Exchange (NSE).
Other sources of funding for the ICF include 0.004 percent of the consideration from the sale and purchase of bonds traded through the NSE, interest earned from investment of the funds held in the account, and financial penalties imposed on operators for non-compliance with CMA rules and regulations.
“We increased the compensation to equity investors from the current Investor Compensation Fund (ICF) to Sh200,000 from Sh50,000, and not much has happened on that front because the market hasn’t had any shocks. But of course there are discussions about bringing more people into the net of the fund,” said Shamiah.
In November last year, the CMA disclosed that it is in discussions with giant tech companies dealing in virtual assets, including Bitcoin, to sell shares to the Kenyan public through the NSE as part of a market-deepening process that would mark the first listing of pure-play virtual asset companies on an African stock market.
The regulator says about four to five virtual asset companies, largely from the US and UK, have expressed strong interest in selling shares to local investors through the Nairobi bourse.
The proposed listings will allow investors to invest in companies that deal in virtual assets, replicating the same model used by gold exchange-traded funds, where investors trade in gold indirectly by owning stakes in gold-dealing companies. The big global virtual asset companies fall into categories such as exchanges, asset managers and infrastructure providers.
