All You Need to Know About the Kenya Capital Markets Authority Regulatory Sandbox

Kenya’s financial market regulator, Capital Markets Authority (CMA) runs a regulatory sandbox with a focus on leveraging technology to deepen the product offering in the capital markets.

The sandbox accepts solutions that have the potential to transform the capital markets which include stock markets, bond markets, and forex markets.

As the regulator, it is the government body that licences and allows financial firms to offer products that are related to the aforementioned capital markets. If you are creating solutions in this field, you are sure to come across CMA.

According to CMA, its regulatory sandbox is a tailored regulatory environment for conducting limited scale, live tests on innovative products, solutions and services.

The process in the sandbox occurs in three steps:

Enquiry

The first thing you need to do to have your product tested is to make an enquiry to CMA to evaluate the relevance of your innovative product.

Upon evaluation, should the product be relevant to CMA’s sandbox, then the given firm can apply to the sandbox via an application form and in line with the Sandbox Policy Guideline Note (PGN).

You will also be required to pay an application fee.

Review

The Authority will review the application, and if satisfied, will admit the firm to the CMA Regulatory Sandbox for a specific period to test its innovation.

Testing

Participants admitted into the regulatory sandbox can test their innovations for a maximum of 12 months.

They can also apply to extend testing for a further period not exceeding 12 months.

If all test parameters are met after the end of the test period, the given firm then exits the sandbox and may be allowed to roll out the product or seek a license/approval.

If the test parameters are not met, the firm will be required to stop the business in line with the proposal in the application.

CMA is also a key figure in the digital space because it is the main body dealing with securities and digital assets in Kenya.

Examples of technologies that CMA is ready to consider include:

• Fungible tokens
• NFTs (Non-Fungible tokens)
• STOs (Security Token Offering)
• Crowdfunding

The CMA sandbox is necessary for creators who have a working product that is ready to roll out, and it is not similar to an incubator or accelerator.

Here is what a CMA representative said about its mandate:

The role of the Authority at this point is only limited to providing the safe space for live testing of the idea or innovation, including providing waivers of sections of the law, as may be necessary to facilitate the innovation. – CMA

The authority says it is working with incubation centres to help develop ideas related to the capital markets to a level of maturity that qualifies them to be admitted into the sandbox.