Innovate around Blockchain technology first before having regulations in place

This was one of the key take away from a KICTANET Blockchain Policy Brief held in Nairobi today. The Policy Brief brought together ICT Stakeholders from both the private and public sector to share ideas around blockchain technology that will provide erudite solutions that will leverage Kenya’s Dynamic ecosystem in the adoption and use of the technology.

“You are changing from using a Cisco Switch to using a Juniper Switch or the other way round, why would an organization need regulations to do that? There is no change in regulation there, the only thing that should be done is to improve efficiency,” said CS Ministry of ICT Mr. Joe Mucheru who was present at the briefing.

Blockchain Technology was viewed as a popular topic in 2016 having entered the top strategic priorities of the CEOs of the Fortune 1000. Venture In the field has grown to USD 1 Billion in 2015 representing 7% of all FINTECH venture capital funding. In 2016, the investment on Blockchain was estimated to grow to USD 10 billion.

Among the key issues that were raised at the policy brief was a move by Central Bank of Kenya in 2015. CBK joined other authorities from around the world to warn that virtual money is insecure and could be used to fund terrorism. The Central Bank linked the use of bitcoin and other illegal tenders in Kenya to terrorism and money laundering due to the untraceable nature of their transactions.

However on this issue, Mr. Mucheru said that one thing people should understand is that Central Bank operates on Laws. “They have regulations that are so clear and there is nowhere in there that there is a law on virtual currency. They have no mandate out of the Kenyan Shilling. On the issue of Virtual Currency which includes bitcoins, CBK had to advice people that they are not involved in it but they did not say Kenyan Citizens shouldn’t use it.”

He added that people should look at the Blockchain technology as a whole technology and should not narrow it down to bitcoins. “The CBK statement back then shouldn’t kill the whole industry,” he added.

Following his statement, it was agreed that it was important to decouple crypto currency and blockchain technology. It was agreed that blockchain the technology that underlies cryptocurrency can have several use cases in various industries and not just in the financial industry. The technology could cut across other sectors including education, health and many more.

Giving a user case of IBM, In 2016, IBM announced an intended partnership with the Kenyan Government through the Ministry of ICT. The partnership would aim at exploring the application of the Blockchain Technology, in the management of health education and real estate, with the view of instituting transparency in Government operations.

“Where we went wrong in this process is to approach the whole Blockchain issue from a regulatory perspective first. It would be better for the ecosystem if various use cases for the technology were adopted and implemented not just in the financial industry. Once the technology is utilized in various industries it will receive much better appreciation from regulators,” said a representative from Communications Authority of Kenya.

Blockchain is basically an uncorruptable digital ledger technology, which is essentially a recordkeeping system that can replace a periodically-updated central database a design that underlies most financial systems used today with a clever distributed database that updates in near real time.