Digital currencies are a strong indicator of illicit financing, Central Bank Governor Patrick Njoroge said yesterday, a position still held by Central Banks across the globe.
Njoroge said the lack of traceability and a regulatory body for crypto currencies makes it a perfect avenue for unscrupulous deals.
“Until the risk is taken care of to our satisfaction, we may continue to come off as anti-crypto currencies. This is something we cannot take for granted,” he said at a workshop on growing influences of alternative investments.
Njoroge commended efforts by the government and the financial sector to adopt Blockchain technology adding that CBK is equally keeping pace with steps to enhance technology in the financial sector.
“We need to revise regulations to promote good market conduct and this means following the global standard setters,” he told the three day Institute of Certified Investment and Financial Analysts forum.
The forum intends to educate investment and financial analysts on emerging investment products with focus on crypto currencies and online forex trading found that although the digital age has presented alternative investment channels.
It emerged that most investors shy away from these opportunities despite being more lucrative.
This is because the products are not only susceptible to fraud and scams but lack of adequate data for valuation has also slowed down uptake.
“The biggest challenge for fintech is one of ignorance; a lot of people don’t understand these things. Also, unscrupulous people who act as intermediaries coning people out of their money have posed a big challenge when it comes to alternative investments,” ICIFA chairman Job Kihumba said.
The Capital Markets Authority, in September enacted regulations to govern online forex trading in efforts to curb illicit financial deals. Under the regulations, Kenya’s online currency traders are required to obtain a licence from CMA.
The regulator estimates about 50,000 people, including brokers, dealers and money managers, are in the online trading business, mainly using offshore platforms that are not regulated in Kenya.
To be registered, the forex dealers must raise Sh50 million in minimum capital, a requirement aimed at protecting consumers.
Foreign dealers wishing to trade in Kenya will also be required to maintain an equivalent of Sh40 million of their capital reserves in financial instruments in Kenya.