CMA regulatory sandbox set for April launch

The Capital Markets Authority (CMA) has outlined plans to roll-out its anticipated regulatory sandbox in April pending the completion of a regulatory framework to guide the incorporation of new market innovations.

Having issued a draft regulatory sandbox Policy Guidance Note (PGN) in December, the Capital Markets regulator on Thursday announced a positive reception to the guidelines underscoring the growing urge by both innovators and investors to tap into Kenya’s potent creative hub.

“We have seen interest from close to 70 entities that remain engaged in the validation of the regulation framework. There has been curiosity from crowd funding platforms touching on areas ranging from health to real estate investment trusts (REITs),” said CMA Director of Regulatory Policy and Strategy Luke Ombara.

The authority will look to incorporate other innovations around financial technology (FinTech) based payment solutions, advisory and high frequency trading under the guidance of existing guidelines prescribed in the Capital Markets Act with room for amendments in policy to accommodate new inventions.

Crypto-currency based innovations have however received the cold shoulder from the CMA as the regulator remains adamant of their potential risks to echo similar sentiments by the Central Bank of Kenya Governor Patrick Njoroge.

“We are not creating a backdoor for entities that chose not to comply with the law. Innovators have to explain why their proposed solutions are yet to be facilitated by existing regulations and share their ultimate impact and targets and consider the proposals for admission from that basis,” CMA Chief Executive Officer Paul Muthaura said.

The CMA boss however remains cognizant of the potential risks to the implementation of the regulatory sandbox and the need to manage the expectations of both innovators and investors.

Part of the concerns evolve around the protection of information from innovators, capacity development and cost implications arising from the potential failure of tests under the regulatory sandbox.

To mitigate against the advent of risks, the CMA remains in close engagement with its partners who include the World Bank, The Kenya Institute of Intellectual Property (KIIP) and the Kenya Investment Authority (Keinvest) to align its regulatory sandbox with global best practice.

The Capital Markets Authority has in addition created a world-wide nexus by signing cooperation agreements with regulators with well established FinTech networks to include the Australia Securities and Investments Commission (ASIC) and the Abu Dhabi Global Markets Financial Services Regulatory Authority.

The implementation of the FinTech Regulatory Sandbox is aligned to the CMA 2018-2023 strategy and is expected to guide the safe adoption of new inventions and innovations in the capital markets spectrum for the deepening of the financial sector to include new capital markets instruments.