CMA Pushes for Blockchain-Based Money Market Funds to Revolutionize Kenya’s Finance Sector
Kenya could soon take a major leap toward digital finance transformation if the government adopts a new proposal from the Capital Markets Authority (CMA) calling for the creation of blockchain-based Money Market Funds (MMFs) — a concept already taking shape in China.
In its latest Capital Markets Soundness Report (CSMR), the CMA urged policymakers to explore a tokenised approach to MMFs, blending traditional fund management with the transparency and real-time tracking power of blockchain technology.
According to the regulator, such innovation could make Kenya’s financial markets more inclusive, efficient, and trustworthy, potentially positioning the country as Africa’s next financial technology hub.
“These innovations could give investors greater flexibility, boost confidence in the system, and set Kenya apart as a forward-looking financial centre,” the CMA noted in the report.
Learning from China’s Example
China became the first country in the world to roll out a tokenised MMF, denominated in its local currency, the yuan. Unlike traditional money market funds that rely on centralised databases, the Chinese model issues digital tokens as proof of ownership. These tokens can be tracked transparently on a public blockchain, allowing investors to monitor transactions and fund performance in real time.
The Chinese fund invests primarily in safe, short-term instruments such as government bonds, fixed deposits, certificates of deposit, and commercial papers — with at least 70% of holdings denominated in renminbi.
Investors can access the fund through regulated banks, brokers, or even licensed virtual asset trading platforms in Hong Kong, bridging the gap between conventional finance and the blockchain world.
How It Could Work in Kenya
Currently, Kenya has no blockchain-based MMF, but the Virtual Assets Service Providers (VASP) Act, 2024 provides a legal foundation for such innovations. Any firm planning to offer a tokenised MMF would first need to secure a VASP licence from the CMA and adhere to strict financial and compliance requirements.
The Act also mandates that the provider be registered locally, maintain a Kenyan bank account and physical office, and comply with Anti-Money Laundering (AML), Counter-Terrorism Financing (CFT), and Know Your Customer (KYC) protocols.
Additionally, client funds must be kept separate from company funds, ensuring investor protection in case of insolvency. Providers would also undergo regular IT and financial audits and submit reports to regulators.
Promise and Pitfalls
Experts argue that tokenised MMFs could democratize investing by lowering entry barriers and providing real-time visibility into fund operations. The transparency and security of blockchain could attract more retail investors and bolster institutional confidence.
However, challenges remain. Kenya’s regulators — notably the CMA and the Central Bank of Kenya (CBK) — would need to coordinate closely to avoid regulatory overlap. Moreover, detailed subsidiary regulations for complex digital financial products like tokenised MMFs are still under development.
Still, the CMA’s proposal signals a bold vision for Kenya’s financial future — one where innovation, technology, and trust converge to reshape how Kenyans save and invest.
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CMA Pushes for Blockchain-Based Money Market Funds to Revolutionize Kenya’s Finance Sector