Kenya’s Capital Markets Authority (CMA) has proposed rules to create a regulatory fintech sandbox for innovations which do not fit within the country’s current financial regulatory framework.
The proposed draft rules to enable the introduction and testing of financial technology (fintech) products such as peer to peer finance (crowd funding), cryptocurrencies, distributed ledger technology (blockchain technology), artificial (e.g. algorithmic trading), big-data, RegTech credit rating, online lenders, and online banks.
They give a safe legal status and safe space to investors and developers to confidently test and unlock these unique financial innovations tailored for Kenyan consumers. The draft rules were drawn after consultation and in lines with rules in Australia, Singapore, Abu Dhabi, Malaysia and UK as guides.
The fintech tools must be ready for testing in a live environment; this will allow them to be tested for defined periods of time and for them to be reviewed by peer groups who work with the CMA. Once companies apply to the CMA, they are to get decisions within 21 days, and at the conclusion, they are to give the CMA a report of their outcomes.
• The CMA will have an annual fintech day that will feature all the sandbox participants.
• Participation in the sandbox can be revoked if a company does not do what it says it intended to, has a security breach, or harms the public, among others violations.
The sandbox rules aim to position Kenya as an investment destination of choice. CMA has in the past drafted rules on REIT’s, bonds and venture capital. Will these new fintech sandbox rules lead to more M-Pesa-like innovations? Will they enable the legal use of bitcoin in Kenya? Review the rules (download) and give the CMA feedback by July 26.