The Capital Markets Authority of Kenya Highlights Key Reasons Why Crypto Startups Struggle to Scale in Kenya

Some of the startups applying to the Capital Markets Authority of Kenya Regulatory Sandbox are creating a solution for a non-existent problem, the authority has indicated.

In an interview disucssing several issues, the Authority indicated this was one of several reasons that make it difficult for crypto startups to scale their businesses.

The issues are outlined in this statement we got from a representative of the authority:

“Business models not well thought out. The creation of a solution for a non-existent problem. Lumping up of too many crypto related products on the set out which dilutes the accuracy with which they introduce the products to the market.” – CMA Kenya

CMA Kenya is the regulatory body that licenses companies and enterprises to operate in Kenya’s capital markets. The capital markets of a country typically include the stock market, the bond market, and the currency and foreign exchange (forex) markets.

CMA’s regulatory sandbox is a tailored regulatory environment for conducting limited scale, live tests on innovative products, solutions and services that have the potential of deepening and broadening the capital market.

CMA also admitted to difficulties in classifying blockchain and crypto startups, highlighting their novelty and legal status as some of the difficult aspects.

The following are some of the authority’s concerns when it comes to startups dealing with the new technologies:

• Novelty and complexity of the regulatory sandbox concept and applications received from fintechs
• Insufficient information regarding the risk universe in the various areas
• The need for continuous capacity building to enhance regulatory competence to review different types of applications
• The cross-border nature of certain solutions like crowdfunding platforms, causes jurisdictional challenges e.g. different property, insolvency and tax laws as well as enforcement
• The dilemma of encouraging self-regulation through fintech associations vis a vis direct state regulation

Still, CMA says that the regulatory sandbox is a great space for innovators to test their ideas as long as they are related to the capital markets.