CMA Regulatory Sandbox Ready to Receive Applications

By Sharon Chweya

The Board of the Capital Markets Authority has approved the Regulatory Sandbox Policy Guidance Note (Regulatory Sandbox PGN) setting the stage for CMA to begin accepting applications for admission of fintech firms to its Regulatory Sandbox.

“We welcome fintech firms and innovators to apply for admission to the Regulatory Sandbox. Where they are successful, they will have a 12-month period to deploy and conduct live-tests of their innovative products, solutions, and services”, CMA Chief Executive Mr. Paul Muthaura said.

The Sandbox is expected to also accelerate CMA’s understanding of emerging technologies, support adoption of an evidence-based approach to regulation and facilitate deepening and broadening of Kenya’s capital markets.

Sandbox Participants will be required to comply with certain minimum regulatory requirements prescribed by law. CMA will, however, assess regulatory requirements to be temporarily modified during a Regulatory Sandbox test on a case-by-case basis

The Authority will provide guidance where it considers that a proposed innovation is already clearly addressed under existing laws and regulations and therefore not fit for inclusion in the sandbox to avoid the creation of regulatory arbitrage between players rendering equivalent products or services.

Upon exit from the Sandbox, participants will be considered for:

1. grant of an existing applicable license or approval to operate in Kenya subject to compliance with relevant legal and regulatory requirements;
2. grant of permission to operate in Kenya subject to compliance with the specified terms of a letter of no objection in respect of a business falling outside existing regulatory provisions; or
3. denial of permission to operate in Kenya in light of regulatory concerns identified during the testing phase.

Mr. Muthaura noted that ‘where the testing phase highlights that there is the need for a broader legal or regulatory reform, the Authority will provide regulatory guidance through the various tools at its disposal ranging from new regulations to guidelines or notices pursuant to Section 12 and 12A of the Capital Markets Act.

“The opportunities created by a robust testing phase will ensure that subsequent regulatory prescription and guidance will be informed by the operational realities and insights gained from the Regulatory Sandbox test.”