Investor interest, both retail and institutional, in digital currencies has risen dramatically in recent months prompting several regulators across the world to ponder strategies on how to regulate the crypto industry.
Following the interest, Kenya’s Capital Market’s Authority has revealed that it is currently reviewing plans to accept Fintech firms with crypto applications into the regulatory sandbox, a ‘testing environment’ that allows innovators to test their products/business models in a live environment without following some or all legal requirements, subject to predefined restrictions.”
In its most recent quarterly report, the regulator says that despite having issued statements together with the Central Bank around the risks associated with cryptocurrency, a more encompassing approach needs to be adopted on the broader FinTech space to onboard other financial sector regulators.
The other regulators that CMA suggests need to be onboarded are; the Insurance Regulatory Authority, Retirement Benefits Authority, and the Saccos Regulatory Authority noting that this will ensure that the success of the CMA regulatory sandbox can be extrapolated to a joint Financial Sector Regulatory Sandbox, “where joint expertise from the various subsectors may be leveraged to test various forms of crypto-assets and other FinTechs to inform future oversight of the same. Specific to crypto-assets the Authority is keen on forging a common stance and joint-messaging with the CBK going forward.”
IOSCO Crypto agenda
Kenya is also a member of the International Organization of Securities Commissions (IOSCO), an association of organizations that regulate the world’s securities and futures markets.
Crypto assets are also part of the six specific priorities identified by the board of the International Organization of Securities Commissions (IOSCO), where the organization will put more efforts in 2021 and 2022.
“The authority as a member of IOSCO welcomes the work program 2021-2022 and will continue to align its efforts towards ensuring a successful implementation of the priority areas in the program,” CMA notes in the report.
Crypto Adoption in Kenya
According to the 2020 Chainalysis 2020 Geography of Cryptocurrency Report, Kenya is the top 5 in global crypto-trading activity based on an analysis of data from over 54 countries. This data indicates that Kenya leads the world in in bitcoin search interest at 94.7 %. Triple A, a blockchain and crypto company conservatively estimate that close to 16.5 % of Kenyans hold crypto currency.
“The aforementioned data denotes growing area of interest that has an impact on the soundness of Kenya’s capital market given its consideration by Kenyans as an alternative investment class. Following the 2018 report by Citibank showing Kenyans holding over Ksh. 162 billion in crypto vis a vis the Collective Investment Schemes portfolio as of December 2018 standing at over Ksh. 61.04 billion. This an area of keen interest to the Authority given its investor protection mandate also given the prevalence of scams on this front.” CMA Kenya.
Crypto in Kenya in 2021
A new research from Mastercard shows that the adoption of new payment technologies in Kenya such as cryptocurrency is rising, and consumer appetite for new, fast and flexible digital experiences continues to grow.
The Mastercard New Payments Index shows 99% of Kenyan consumers will consider using at least one emerging payment method, such as cryptocurrency, biometrics, contactless, or QR code, in the next year.
Additionally, the survey shows 4 in 10 people (43%) in Kenya say they plan to use cryptocurrency in the next year, with more than two-thirds (69%) noting they are more open to using it than they were a year ago.