By BRIAN NGUGI
In Summary
- CBK has warned against use of Bitcoin and such, the Capital Markets Authority (CMA) appears to have a liberal view on their possible use.
- CMA has finalised the development of consultative policy paper for establishment of a Regulatory Sandbox that will allow the regulator to support Fintech innovations.
- Digital currencies such as Bitcoin are issued and usually controlled by its developers, and are used by members with virtual communities.
To introduce virtual currency or not is the big debate among Kenya’s market regulators and players.
Whereas the Central Bank of Kenya (CBK) has warned against use
of Bitcoin and such, the Capital Markets Authority (CMA) appears to have
a liberal view on their possible use.
A local company says there is no need for fear given that
introduction of the now popular credit cards also came with warnings
from a number of countries ditto mobile money.
In December 2015, the banking regulator issued a stern warning
on the dangers of Bitcoin, a digital currency, joining its peers around
the world ratcheting up warnings against the use of virtual currency
saying the risks far outweigh any possible benefits.
The regulator said at the time, that it should not “be held
liable for any losses” incurred by consumers using digital currencies to
settle transactions, as it is not a legal tender in the country.
“Virtual currencies are traded in exchange platforms that tend
to be unregulated all over the world. Consumers may, therefore, lose
their money without having any legal redress in the event these
exchanges collapse or close business,” the CBK warned in the notice.
The CMA on the other hand seems to be more open-minded on the future of digital currencies in Kenya.
The authority’s chief executive officer Paul Muthaura stated on
April 11 that the regulator will give Financial technology firms
(Fintech) an opportunity to interrogate and learn more about the
regulatory environment as well as give the regulators an opportunity to
work closely with players to understand their unique challenges.
Conducive environment
The CMA, he said, has finalised the development of consultative
policy paper for establishment of a Regulatory Sandbox that will allow
the regulator to support Fintech innovations.
He said a soon to be held forum will provide input into a paper,
which will further provide the basis for a regulatory framework for
financial technology laboratories in Kenya.
“The ultimate objective of the authority is to provide Fintechs
in the capital markets such as; finance smartphone ‘apps’; equity
crowdfunding and peer-to-peer lending platforms; robo-advice for
investment; blockchain technology; big data; crypto-currency and other
finance focused technology products, with a conducive environment where
they can test their innovations in a relaxed regulatory environment
before taking them to the market,” said Mr Muthaura.
Mr Muthaura’s written remarks were made on his behalf by Mr Luke
Ombara, CMA regulatory policy and strategy director, during the listing
of the M-Akiba bond, the world’s first mobile phone traded government
security, in Nairobi last month.
Mr Muthaura said the Kenyan Government had set the tone by
bringing on board “the first true, transformative and innovative
Fintech, M-Akiba” adding that already the CMA is reviewing a number of
crowdfunding platform applications.
“To take Fintech oversight to the next level and in line with
the commitments in the Master Plan, the authority has positioned the
Kenyan capital markets space to leverage on opportunities that digital
finance provides,” he said.
According to Ms Elizabeth Rossiello, CEO, BitPesa a digital
currency payments platform in Kenya, time is ripe for regulators to give
room for use of such currencies.
Ms Rossiello said resistance by the CBK is similar to other
consumer notices posted in the US, Europe and Asia about Bitcoin a few
years ago.
“There was a lot of fear about credit cards when they were first
introduced to the market. There was even more fear when mobile money
came out. What was this technology? How could it be safe? ,” she pointed
out.
Market capitalisation
According to her, however, the future of digital currencies is bright.
“Internationally, all of the largest financial institutions have
Bitcoin and blockchain programmes, investments and even patent
applications. Visa Europe commented that working with bitcoin “is no
longer a choice anymore,” proving that the technology has moved from the
fringes towards the mainstream of financial innovation. Bank of America
filed applications for 10 different patents using Bitcoin and
blockchain technology,” she said.
Digital currencies such as Bitcoin are issued and usually
controlled by its developers, and are used by members with virtual
communities.
The sector’s market capitalisation has surged more than 60 per
cent so far this year, and nearly 260 per cent over the past 12 months,
to nearly Ksh3.09 trillion ($30 billion), according to Coinmarket.com.
Blockchain is a public online ledger of transactions that first became well known as the software underpinning Bitcoin.
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