Capital Markets Authority cautious on financial innovations
By Otiato Guguyu | September 30th 2017
The Capital Markets Authority (CMA) says it wants to create a secure environment to test innovations such as Bitcoin before they are allowed into the market.
Central Bank of Kenya (CBK) is firmly against digital currencies.
“We have stepped forward to set up a regulatory sand box where technology firms can try out their proof of concept before they are available in the market,” said CMA Chief Executive Officer Paul Muthaura yesterday.
“This will be done without the regulatory costs to allow the firms to establish viability before scaling up and regulation can then step in.”
The regulator says the sand box, which was launched at the beginning of June, will start operations in the first quarter of next year.
CMA wants to bring all regulators on board in setting up the framework since such solutions require players in insurance, savings and investments.
CBK, however, says it has a mandate to protect consumers and has opposed the use of the cryptocurrency over what Governor Patrick Njoroge called the ‘Bitcoin bubble’.
Bitcoin is a new payment system introduced in 2008 that is transmitted through the internet, bought and sold for currency through exchange.
“We have all got into this sort of bubble kind of scenarios. We all know about the tulips, all those south sea diamonds or whatever they were and of course there’s also now a new bubble otherwise known as Bitcoin. These are all the things that we live and breathe,” said Njoroge.
A market bubble is where investors behave like a herd and push the value of instruments above what they are worth, only for them to lose out when the market corrects itself - such as the 2008 mortgage finance crisis in the US.
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