Crypto Yield Vaults as Investment Schemes in Kenya

Crypto yield vaults are everywhere: deposit stablecoins or tokens, the vault runs a trading, lending or market-making strategy, and depositors share the profit and loss. Some are run by companies; some are run by smart contracts with no manager at all. Kenyan law does not have a category called “vault”. It has two regimes that can catch one: the collective investment scheme rules in the Capital Markets Act, and the virtual asset manager licence under the Virtual Asset Service Providers Act, 2025. This article explains when a vault falls into either, and what that means for anyone offering one to Kenyans.

What a vault does

A typical vault pools deposits from many users into one strategy. Depositors receive a share or token representing their portion of the pool. The strategy might provide liquidity on an exchange, take over liquidated positions, lend to borrowers or run automated trading. Returns are not fixed; they depend on how the strategy performs. Withdrawals are often subject to a lock-up period.

Some on-chain exchanges rely on a protocol-owned vault as their market maker of last resort. Users who deposit into it are, in substance, taking a share of the exchange’s market-making and liquidation book.

The collective investment scheme definition

Section 2 of the Capital Markets Act defines a collective investment scheme to include an investment company, unit trust, mutual fund or other scheme, whether or not established or organised in Kenya, which collects and pools funds from the public or a section of the public for the purpose of investment and is managed by or on behalf of the scheme by its promoter.

Three features of that definition matter for vaults:

• “Other scheme”. The list is not closed. A vault does not need to look like a unit trust to qualify.
• “Whether or not established or organised in Kenya”. A vault deployed offshore is not outside the definition because of where it sits.
• Pooling from the public for investment. A vault open to anyone with a wallet pools funds from the public, and depositors join to earn a return.

Section 30(1) then provides that no person shall carry on any business or engage in any activity as a collective investment scheme, in or from within Kenya, unless registered under the Act. Registration runs through the promoters, who must apply to the Capital Markets Authority for consent under section 30(2).

Does “funds” include crypto?

This is the main argument against applying the definition. The Capital Markets Act speaks of pooling “funds”, and a vault depositor contributes virtual assets, which the Act does not mention. We do not think that distinction would carry much weight. Stablecoins are designed to function as money, and a scheme that pools them for investment returns does exactly what the CIS rules were written to control. A court applying a purposive reading is likely to treat pooled virtual assets as funds for this purpose.

The “managed by the promoter” element

The definition requires management by or on behalf of the scheme by its promoter. Section 2 of the Capital Markets Act defines a promoter as a person who takes the initiative in forming or organising the business of a collective investment scheme.

For a vault run by a company or a named team, that is straightforward. For a vault run entirely by code, someone still wrote the strategy, deployed the contract and usually holds parameters or upgrade rights. The more control a team retains, the stronger the case that it is the promoter managing the scheme. A genuinely immutable vault with no ongoing operator is the hardest case for a regulator, but also the rarest.

The virtual asset manager route

The VASP Act offers a second, overlapping category. The First Schedule describes a virtual asset manager as one managing portfolios in accordance with mandates given by clients on a discretionary basis, where the portfolios include one or more virtual assets. It is licensed by the CMA.

Under the Virtual Asset Service Providers Regulations, 2026 (Legal Notice 134 of 2026), a virtual asset manager needs paid-up capital of KES 20 million under the Fifth Schedule, and regulation 87 requires it to:

• maintain risk-based capital to cover operational and technology risks;
• appoint a custodian licensed in Kenya where it manages consumer funds; and
• keep investments in or through related companies below 10% of assets under management unless the regulator approves.

The two regimes are not alternatives. A pooled vault offered to the Kenyan public could need both: CIS registration for the scheme and a virtual asset manager licence for the entity running it.

What vault operators should do

1. Decide whether Kenya is a target market. Regulation 4(2) of the VASP Regulations deems a person to operate in or from Kenya where it targets Kenyan consumers or derives income from Kenya.
2. If it is, plan for licensing. A Kenyan-registered scheme with a licensed manager and a Kenyan custodian is the clean route.
3. If it is not, restrict access. Geoblock the interface, refuse Kenyan KYC and do not market to Kenyans.
4. Do not promote a vault as a savings product. Regulation 72 bars any licensee from granting interest when providing services related to stablecoins, and treats time-based rewards as interest.

For Kenyan promoters and influencers, the risk is personal. Marketing deposits into an unregistered pooled scheme is exactly the conduct section 30 is aimed at.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.