According to a new report published by the Capital Markets Authority (CMA) of Kenya, the country’s regulatory sandbox has now received 24 applications, queries, and proposals since March 2019. From this total, only seven firms have been admitted into the sandbox, and “a few more (are now) in the final stages of review.” However, just two out of the seven admitted firms have completed their testing phase and plan to roll out the products soon.
Regulator and Innovator Rapport
Meanwhile, the CMA concedes that this regulatory sandbox had afforded it with the opportunity to work and learn from innovators. In the document, which is titled the Regulatory Sandbox Milestone Report, the CMA states:
While it is still too early to assess the impact of the Regulatory Sandbox in the capital markets, one important point to note is that the sandbox allowed the Authority to work with innovators to build appropriate consumer protection safeguards into new products and services.
Further, the regulator says it now understands that its close interactions with the innovators during the test had helped “in terms of obtaining new knowledge from the market and better understanding the products.”
However, in the same report, the CMA gives a run-down of the challenges it faced in the test period that is expected to last twelve months. For instance, from its interactions with innovators that focused on blockchain and crypto solutions, the CMA observed that “insufficient information regarding the risk universe in this area” had proven to be a key challenge.
In addition, the report lists the CMA’s “lack of internal capacity to review these types of applications” as well as “objections by central banks to (the) issue of cryptocurrencies” among the other key challenges that were encountered.
With respect to the lessons it learned in this period, the CMA says it now understands the need for regulators to “work closely with applicants.” The reason for this is “mainly because the fintech firms are the owners of the ideas and they understand these ideas better than the regulator.”
Meanwhile, the other lessons learned include the need for coordination and cooperation between different regulators. The CMA also says it now understands that it should “never dismiss any idea before doing a proper assessment of it.”
What do you think of the CMA’s Regulatory Sandbox report? You can share your thoughts in the comments section below.