On virtual cash you are alone, warns markets authority
CMA has not approved Kenyan developed digital currency Nurucoin. FILE PHOTO | NMG
What you need to know:
- CMA’s warning is seen as a reaction to Kenya’s Nurucoin, which is managed by owners of e-commerce platform BlazeBay, a subsidiary of Churchblaze Christian Association which runs a number of technology and social networking platforms.
The Capital Markets Authority has cautioned Kenyans on the dangers of participating in initial cryptocurrency coin offerings (ICOs) citing high risk of exposure to fraud.
The CMA is the second financial regulator after the Central Bank of Kenya (CBK) to issue caution against cryptocurrencies, reminding investors that they have no fall-back in case of loss since neither regulator has oversight on the Internet-based digital currencies.
The capital markets regulator’s warning comes at a time when a local group is selling a Kenyan developed digital currency known as Nurucoin, which the CMA has not approved.
The CMA says that its caution is based on the wider risks in coin offerings identified by the International Organisation of Securities Commissions (IOSCO) — of which it is a member — that include potential for fraud, cross-border distribution risks, information asymmetry on the risks, costs and returns and liquidity risks when one wants to exit the investment.
“There are ongoing invitations to members of the public to invest in such coins in what is being marketed as ‘pre-sale before the launch on public exchanges’,” said CMA in a notice published Tuesday.
“While some ICOs are floated by entrepreneurs with genuine and innovative ideas for new products and services, there is a risk that some issuers could seek to perpetrate fraud against investors. Most ICOs operate solely over the Internet, and the fact that the products and sellers may not be subject to regulation exposes investors to fraud.”
CMA’s warning is seen as a reaction to Kenya’s Nurucoin, which is managed by owners of e-commerce platform BlazeBay, a subsidiary of Churchblaze Christian Association which runs a number of technology and social networking platforms.
