Regulation and taxation in the crypto space has become a hot topic in Kenya recently. The recent attempt by the legislators to try and understand, and possibly, limit the use of these new digital payment methods has been received with mixed reactions.
On one hand, the fintech players are worried that rushing to implement regulation is going to curtail innovation. On the other hand, legislators are worried about the risks that these new technologies bring and the revenue losses that would be incurred if they are unregulated.
Regulators are already moving fast in ensuring upcoming innovations are safe before going public.
“Regulators are built structured for protection and not for responses. We always have to start from a worst-case scenario . . . What we’re trying to do with regulatory sandboxes is building safe spaces to help us understand how your product works and the true nature of its risk before we build a layer of regulation.” ~ Paul Muthaura, CEO, Capital Markets Authority of Kenya.
According to Muthaura, regulation is country-specific based on the demands of each jurisdiction.
Striking the Balance
While both sides of the divide have cause for worry, the issues boil down to regulation. There is no doubt that regulation is necessary but the extent to which such regulation is implemented is where the problem lies.
According to Aaron Fu, Managing Director, MEST Africa, “I think most regulators are in reading mode. Most are trying to grasp and understand these deep technologies with some reading a little bit more and meeting other regulators across the world to understand how these sandboxes are being built.”
While speaking at the Finnovation event, the CEO or Barclays Kenya, Jeremy Awori, expressed concern over this issue. The over-regulation of banks in Kenya has already affected innovation in this space and with more regulation, there is a high chance that innovation is going to be affected.
Looking at the current landscape, one can only hope that the upcoming sandbox regulatory framework is going to be friendly and will encourage innovation, especially in the crypto and blockchain space.