Kenya has unveiled its first regulatory framework allowing physical and intangible assets, including land and buildings, to be converted into blockchain-based digital tokens and traded in fractional ownership, bringing the emerging market under formal oversight.
The provisions, contained in the Virtual Asset Service Providers Regulations, 2026, permit businesses to issue digital tokens representing ownership or economic interests in real-world assets, provided they obtain licensing and approval from the Capital Markets Authority (CMA).
The regulations follow more than a year of testing in the CMA’s regulatory sandbox, where firms such as AlphabloQ and Yeshara piloted tokenised investment platforms designed to make traditionally illiquid assets accessible to a wider pool of investors through fractional ownership.
Under the new rules, issuers must clearly disclose whether token holders acquire direct ownership of an asset or only a fractional economic interest, alongside the legal framework governing those rights.
The framework aims to lower barriers to investing in assets such as commercial property by allowing multiple investors to own small portions of a single asset instead of purchasing it outright. In practice, tokenisation enables a property to be divided into thousands of blockchain-based digital units that can be bought and traded on regulated platforms.
To qualify for a tokenisation licence, companies must maintain at least KSh10 million in paid-up capital and liquid capital of KSh2 million or 8 percent of total liabilities, whichever is higher.
Applicants are required to pay a KSh100,000 application fee and a KSh500,000 licensing fee. Annual renewals will cost KSh500,000 or 0.15 percent of gross turnover, whichever is greater. Before approval, firms must also subject their tokenisation systems to an independent audit separate from the valuation of the underlying assets.
Obtaining a licence does not automatically allow firms to issue tokenised assets. Every public offering must receive separate CMA approval, attracting a fee equal to 0.25 percent of the value raised, subject to a minimum of KSh200,000 and a maximum of KSh30 million. This means operators must secure both a business licence and transaction-specific authorisation before raising capital.
The tokenisation licence complements existing licensing requirements for virtual asset service providers, including fit-and-proper assessments, disclosure of funding sources and submission of business plans.
Investor Protection Measures
Before approving an offering, the CMA must verify that the underlying asset has clear legal ownership and can be independently confirmed in terms of its existence, value and condition. Assets with disputed ownership, uncertain legal rights or unverifiable valuations are unlikely to qualify.
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Issuers must also demonstrate that assets are free of encumbrances, provide independent market valuations, disclose who retains legal ownership and custody of the asset, and show that ownership rights remain enforceable after tokenisation.
Prospective investors must receive comprehensive disclosures similar to those required in traditional securities markets. These include details on ownership rights, the legal structure supporting the tokens, how investors would recover value if the asset is sold or the issuer becomes insolvent, and the principal risks associated with the investment.
Issuers are further required to explain valuation methods, cybersecurity safeguards, token transfer mechanisms, proposed trading arrangements and the technology underpinning the issuance.
Trading and Regulatory Oversight
Once approved, issuers must create tokens on a distributed ledger, encode ownership, transfer and profit-sharing rules into smart contracts, distribute the tokens through a primary offering and list them on licensed token issuance platforms where investors can trade them in the secondary market.
These trading platforms will operate under CMA supervision and must maintain records of approved listings while notifying the regulator of any listings or delistings. The CMA also has the authority to order the removal of assets that threaten investor protection or financial stability.
The regulations prohibit issuers from making significant changes to approved offerings without fresh regulatory approval. Amendments affecting governance structures, token-holder rights, liquidity arrangements, distributed ledger infrastructure or other core features must be cleared by the CMA and accompanied by updated disclosures.
Analysts expect the regulations to support growth in Kenya’s digital asset market as the global tokenised real estate sector is forecast to expand by roughly US$3 trillion by 2030, with tokenisation viewed as a complementary tool that could widen access to property investment while improving market liquidity.
