Kenyan Regulatory Agencies Begin Work on a Comprehensive Legal Framework for Cry...

Kenya’s Joint Financial Sector Regulators (FSRB) have resolved to work on recommendations for the establishment of an oversight framework targeting crypto assets, players, and activities in Kenya.

In a statement published by the Central Bank of Kenya (CBK), the group, which consists of 5 regulatory bodies indicated that their action was in response to a ‘recommendation’ from the Kenya Ministry of National Treasury and Economic Planning.

Communique on the 13th Joint Financial Sector Regulators' Board Meeting pic.twitter.com/E6Sa1Jzg1U

— Central Bank of Kenya (@CBKKenya) December 16, 2022

The group also wants to coordinate the development of a framework for promoting the adoption of technology and innovations in the financial services sector so as to help them with effective regulation and supervision.

FSRB’s main role is to enhance how the respective organizations collaborate in mutual areas including legal and policy issues, regulation and supervision, and information sharing. The members include:

• Capital Markets Authority (CMA)
• Central Bank of Kenya (CBK)
• Insurance Regulatory Authority (IRA)
• Retirement Benefits Authority (RBA)

In October 2022, CBK Governor, Dr. Patrick Njoroge, said they were keen on regulating cryptocurrencies because they are apprehensive of the fast pace of growth in the sector and what this could mean for consumers.

“The point is, like all asset classes, one needs to regulate it in some way to make sure that this is something that not only makes sense but whoever is involved in it it doesn’t bring in the other evils and negatives that actually could very easily open the door to if left unchecked.” – Governor, CBK 

He has previously also said he would be crazy to let Kenya add bitcoin to its reserves reiterating that cryptocurrencies need to pass a test as to what they are solving.

However, the Governor has insisted they are not trying to get in the way of innovation. Together with the other members of the board, they will be submitting recommendations to the ministry headed by the new minister and immediate former Central Bank governor, Prof. Njuguna Ndung’u.

Ndung’u is thought to be more open to crypto, and enthusiasts in Kenya have been keeping an eye on his actions during his tenure in the Kenyan government.

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Bitcoin ends 2022 down 65%, its second-worst yearly performance since 2011, only beaten by 2018’s -73%, a new Arcane Research report shows.

“In this year’s high inflation environment, physical gold (-1% YTD) has vastly outperformed bitcoin, the digital gold. BTC’s digital gold narrative was premature, but the narrative delivered during the inflation build up of 2021.” – Arcane Research

According to Arcane, the crypto winter of 2022 was fueled by tightening macro conditions and vastly exacerbated by crypto-specific leverage and awful risk management by core market participants. The researchers also identify a positive correlation between crypto and equities in 2022 though predicts this to disappear next year as trading volumes in crypto also drop.

A subset of cryptocurrencies however fared much better in 2022, and these are privacy coins which outperformed the rest of the market this year, seeing a year-to-date loss of 47%.

“The relative strength of privacy coins is likely caused by the sustained utility of Monero related to darknet transactions,” the research points out.

Still, another trend is exchange tokens outperforming BTC and ETH this year, including FTT.

“The exchange token performance is highly dependent on how BNB is labeled. When excluding BNB, we note that exchange tokens under-performed BTC and ETH.”

Perhaps the biggest performing crypto category in 2022 were stablecoins. The total stable-coin market cap relative to BTC’s market cap rose from 15% to 41% in 2022.

2022 was a good year for centralized, non-algorithmic stable-coins. Tether, USDC, and BUSD have all seen their market share increase substantially throughout the year.

The stablecoin trio currently has a combined market cap representing 41% of BTC’s market cap, 28% of BTC and ETH’s combined market cap, and 17% of the total crypto market cap. Starting the year, the stablecoin market cap represented 15% of BTC’s market cap, 10% of BTC and ETH’s combined market cap, and 6% of the total crypto market cap, the research shows.

Finally, one undisputed winner in 2022 was Binance.

“No matter how you look at it in terms of trading activity, Binance is the crypto market. After lifting trading fees for its BTC spot pairs this summer, Binance completely overtook all market share in the spot market, currently representing 92% of the BTC spot market volume in the last seven days,” Arcane reported

Additionally, in 2022 Binance has:

• Taken market share in the stablecoin market
• Seen its token vastly outperforming BTC and ETH
• Been a clear outlier in terms of employment, doubling its employee stack in a year when several competitors have laid off half its workforce or gone bankrupt

It will be interesting to see how the market works out in 2022, even though the guys over at Arcane have been making some predictions. They see Binance re-introducing BTC trading fees again, leading to a normalization of the market dominance.

They also foresee Bitcoin trading in a predominantly flat range this year, but close 2023 at a higher price than the yearly open.

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