Market volatility and the absence of regulatory frameworks are among the key factors that are inhibiting investments in digital assets in Kenya, a new survey now shows.
This year’s edition of the Standard Chartered’s Wealth Expectancy report says that half of those who are less likely to invest in digital assets this year said the markets are too volatile while 33 per cent cited a lack of enough regulations.
Some of the most common digital assets are related to Blockchain technology and include non-fungible tokens (NFTs), cryptocurrencies and virtual real estate in the metaverse.
The survey further found that market volatility had seen 10 per cent of investors divert their investments out of this asset class as at the time of the study.
Among those who invest less in digital assets than they did previously, 37 per cent put their money into cash savings while 29 per cent converted theirs into equities.
Twenty-one per cent diverted their money into residential real estate.
“The change in the digital markets, fall in tech stocks and the likelihood of future regulation across the globe which could impact asset values, are likely to continue to impact investor confidence going forward,” reads the report.
Recently, the crypto sphere experienced a near-existential crisis following the collapse of one of the world’s biggest exchanges, FXT, which enjoyed a whopping $32 billion (Sh4 trillion) valuation at the start of the year.
FXT’s collapse massively eroded confidence among cryptocurrency investors amid claims that the firm’s founder Sam Fried misused client funds.
Exchange firm Yellow Card Chief Compliance Officer Mandy Naidoo says digital assets trade, specifically cryptocurrencies has not achieved a 100 per cent guarantee for safety and calls for tailored regulations to add to the industry’s protective gear.
“The original idea for crypto trade was aimed at attaining global financial freedom and inclusion. As trading and a savings scheme, crypto investments like all other ventures need to be effectively regulated to cushion the industry from unforeseeable shocks,” says Ms Naidoo.
A majority of investors who participated in the StanChart survey, however, say they have seen substantial returns from digital assets.
The survey found that younger investors, who are set to drive the sector’s growth this year, are more than twice as likely as those aged over 55 to say that most of their wealth has come from digital investments.
“A quarter said that most of their wealth came from investing in digital assets while 45 per cent said that some of their wealth has come from these assets and just 24 per cent said none of their wealth came from digital assets,” said the report.
Kenya has continued to put cryptocurrency off the menu with the Central Bank of Kenya governor Patrick Njoroge constantly reiterating a long-held position that “Bitcoin and similar products are not legal tenders”.
Over the years, myriad attempts to impose regulations in the self-styled liberal digital assets industry have been met with little progress, with the operations remaining murky to a larger portion of the global populace.
Lack of sufficient regulation coupled with clarity deficiency on the sector’s legal status means there is no safety net and presents little recourse if funds are lost.
It also makes it difficult to establish the value of digital assets held by the mostly tech-savvy Kenyans, but the amount is estimated to be running into billions.
