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.
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 simliar 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.
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 Sh3.09 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.