Kenya’s plan to introduce regulations for the crypto industry may not bear fruit if they’re not backed by globally coordinated efforts to control the sector, the World Economic Forum has warned.
The global economic lobby has called for a concerted approach to regulate the industry, noting that the borderless nature of crypto assets is making it hard for any single jurisdiction to succeed in regulating the sector.
Countries need to harmonise their understanding and classification of digital assets, set common standards and establish data-sharing initiatives, WEF said.
“The evolving crypto-asset ecosystem and recent market events have underscored the pressing need for collaboration and the building of robust guardrails,” said Matthew Blake, head of the centre for financial and monetary systems at WEF.
“While jurisdictions may take different approaches to regulating crypto assets, it is important to foster partnerships between international organisations, national authorities and industry stakeholders to ensure a baseline level of consumer protection and market integrity,” he added.
According to a whitepaper meant to chart the path to effective regulation of the industry, WEF argues that there is yet to be a standard definition or characterisation of crypto assets.
For example, the UK’s revenue authority considers crypto assets to be “exchange tokens” for use in payment while the EU considers them as “digital assets or property”.
“Without a common minimum understanding it is difficult to regulate the ecosystem from a global perspective, considering the cross-border nature of crypto-asset activities,” the whitepaper reads.
In Kenya, there is currently a bill in parliament that seeks to classify cryptocurrencies as capital markets products, thereby subjecting them to similar regulations as stocks and securities.
If passed, it will require crypto exchanges to be registered with the Capital Markets Authority. It will tax gains on sale of cryptocurrency and ban their advertisement on mainstream media.
Currently, Kenya is the only country in the region that has made reasonable steps towards introducing any regulations for the unconventional sector.
In a policy paper last June, the UN Conference on Trade and Development asked developing countries to – among other measures – ban regulated financial institutions from holding cryptos or offering such services to clients.
It also recommended the mandatory registration of crypto exchanges and wallets, banned their advertisement in public spaces and media, and called for the creation of central bank digital currencies. Kenya, Uganda, Tanzania and Rwanda are currently among 40 countries already researching on creation of CBDCs in efforts to deal with the threat of cryptocurrencies on their monetary sovereignty.
The EU, US and the UK, have either introduced mandatory registration for crypto intermediaries or restricted their marketing and promotion, or both.
However, according to WEF, having stringent regulations in some parts of the world doesn’t help the industry as builders only shift to regions with less stringent rules.
“Global coordination may require countries to develop a consensus or, at the very least, harmonise policy and regulatory frameworks,” the lobby said.