Financial institutions knocking on CBK’s door for blockchain approval – Dr. Njoroge
NAIROBI, Kenya, May 22 – Players in the financial markets are prepping themselves to launch blockchain backed products and services.
Speaking to a gathering of financial and investment analysts, Central Bank of Kenya Governor, Dr Patrick Njoroge says they have received a number of applications from financial institutions seeking approval and licensing of blockchain technology linked products and services.
“A number of banks are currently working on products (and services) hinged on blockchain technology and we think that they offer a lot of promise,” said Dr Njoroge.
The statement by the CBK governor comes at a time when the financial industry is a beehive of activity as it seeks ways to respond to the disruption brought about by blockchain technology.
Market regulators and players in the financial industry are currently exploring guidelines and regulations for blockchain technology, cryptocurrencies and forex online trading.
Dr Njoroge says that the central bank is not opposed to cryptocurrencies but that the institution is weighing closely the risks that cryptocurrencies pose to the greater financial system.
“We are not anti-innovation or anti-crypto currency. We support innovation but are concerned about the impact on financial instability and the inherent risks,” said Dr. Njoroge
“CBK is working with central banks all over the world to identify the risks and find ways to mitigate them. The weakest link is where problems in our financial system will start.”
Blockchain Technology refers to a type of data structure that enables identifying and tracking transactions digitally and sharing this information across a distributed network of computers, creating in a sense a distributed trust network.
The distributed ledger technology offered by blockchain provides a transparent and secure means for tracking the ownership and transfer of assets.
Initially used as the transactional technology behind cryptocurrency (or digital currency), blockchain technology has started to gain traction in the enterprise as well, with applications far and wide including in areas such as real estate, product tracking, voting platforms among other myriad applications.
Cryptocurrencies and forex online trading are among the many alternative investment schemes which have been gaining currency in Kenya, across the region and globally. The most known product of blockchain technology is bitcoins.
ICT Cabinet Secretary Joe Mucheru named a taskforce that is due to give its recommendations on the use of blockchain in the country by June this year.
Dr. Njoroge said that in as far as forex online trading is concerned, transactions sometimes happen without the confines of areas of jurisdiction of the central bank of Kenya.
Capital Markets Authority last year made public a regulation to stem risks associated with forex online trading and trading in cryptocurrencies. Only one firm in Kenya has an online foreign exchange license.
In a statement, Esther Koimett, the director general, public investment and portfolio management at the national treasury says the national treasury takes a keen interest on matters that impact on Kenya’s financial sector and that alternative investments are increasingly becoming important in mobilization of resources.
“Last year the government launched the M-Akiba Bond as an alternative way for Kenyans to invest in Government Securities. Such alternatives need to be encouraged,” said Koimett.
In a speech read on his behalf by Lazarus Kimang’a—the chairman of ICIFA registration committee, Bernard Ndung’u, the chairman of Public Sector Accounting Board (PSAB) said that it is time the government addressed issues to do with the legal environment around alternative investment ever-changing the challenges that come with the complexity of accounting for and computation of returns for products and services of alternative investment schemes.
“Due to the ever changing investment environment, there is a need to improve and continuously enhance the skills of financial analysts employed within government institutions. This will ensure that public sector entities are provided with sound advice on investment alternatives and strategies that derive them maximum returns,” said Ndung’u.
Ndung’u also expressed concerns regarding susceptibility to fraud for alternative investment schemes and the difficulty that financial market players have in valuing alternative investments such as bitcoins.