The Cryptocurrency and initial coin offerings (ICOs) hype has been growing rapidly globally including Kenya. As a result, regulators such as the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK) have published notices warning Kenyans about the financial risk involved.
With regards to ICOs, the CMA said it has not approved them and termed them as “unregulated and speculative investments with considerable risk exposure to the investor.”
Therefore, in its soundness report for Q1 2018, the Authority proposes the creation of a joint work group by the financial sector with the aim of developing a single measure for dealing with cryptocurrencies and ICOs.
“Regulators need to communicate their willingness to accommodate fintechs to the market to remove the perception that regulators are innately hesitant to appreciate new fintech innovations,” the CMA report states.
Alternatively, the Authority recommends forming “a special unit that is an arm of all relevant regulators” to handle all matters surrounding regulating cryptocurrencies.
So far, the government has embraced blockchain technology by creating a blockchain and AI taskforce, however, it is still fighting cryptocurrencies.
“If they are seeking to make a public offer without clear restrictions on eligibility to participate as well as where they are not conducting any form of suitability, risk, and capacity analysis of the investors before them becoming eligible to participate in an ICO. We intend to use the Fintech Sandbox Framework to create a [facilitation] environment for unrestricted (public/retail) issuance to occur with an appropriate level of oversight,” Paul Muthaura, CMA chief executive said.
The International Monetary Fund (IMF) proposes that governments should tap into the benefits of blockchain technology, the underpinning bitcoin technology, while ensuring financial stability and curbing the risks of money laundering and terrorism financing.