Are Kenya’s Stablecoin Rules too strict?

Good evening. It’s Brian from The Kenyan Wall Street.

These are our top financial stories today…

MPs Question Whether Kenya's Stablecoin Rules Are Too Strict 

By Brian Nzomo

Kenya's draft stablecoin regulations require issuers to hold 30% of their reserves in local banks, on top of existing rules already requiring full backing for every token in circulation, and MPs on the Committee on Delegated Legislation are now questioning whether that extra layer makes sense. Their concern is practical: the regulations apply to any firm serving Kenyan users "in or from Kenya," regardless of physical presence, raising the question of why a foreign issuer would bother parking a third of its reserves in Nairobi banks rather than simply serving Kenyan customers from somewhere more accommodating. Lawmakers also flagged a separate redemption clause requiring stablecoins to be honored "at any time," language they argue is vague enough to invite disputes between issuers and token holders rather than prevent them. The deeper tension running through the entire framework is the one regulators always face with new financial technology: rules strict enough to attract institutional-grade players and protect consumers can just as easily be strict enough to convince everyone else to set up shop elsewhere. 

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Absa Group : Tightening the Grip on Kenyan Unit

By Harry Njuguna

Absa Group has offered KSh 30.91 billion to lift its stake in Absa Bank Kenya from 68.5% to as much as 85%, at KSh 34.50 per share, a clear premium over recent trading levels. The move follows months of signals from Absa's leadership that the group wanted a bigger share of the returns on a subsidiary whose full risk it already carries on its balance sheet. Absa has been careful about how it is positioning this, applying to regulators for an exemption that would let it grow its stake without triggering the obligations that come with that kind of move. The timing also matters, landing in the middle of a broader reshuffling of ownership across Kenya's banking sector that other giant South African lenders are eyeing. 

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Kenyan Fund Managers Are Sitting on Record Cash

By Harry Njuguna

Kenya's fund managers are sitting on KSh 120.22 billion in cash, a sum that has crossed KSh 100 billion for the first time and grown nearly 24-fold from just KSh 5.04 billion five years ago, making it the fastest-growing asset class on their books. The pace of that growth is the real story: cash rose 35.9% in a single quarter, far outpacing the industry's already brisk 12.6% quarterly growth in total assets, which suggests fund managers are choosing to sit still rather than deploy. Ziidi Money Market Fund is the most extreme example, holding 41.5% of its entire portfolio in cash, more than double what either Sanlam or CIC hold relative to their own books. Government securities and fixed deposits still anchor the industry's KSh 851.71 billion in total assets, but the steady climb in cash holdings hints at a notable shift. 

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Kenya's First Dollar REIT Has Investors Lining Up

By Harry Njuguna

TRIFIC SEZ's Green USD I-REIT closed 103.3% oversubscribed, raising US$30.82 million and clearing the way for Kenya's first dollar-denominated real estate trust to list on the NSE on June 29. The trust is anchored by the North Tower, a green-certified office building in Nairobi's Gigiri district that is 45% occupied by Teleperformance under a long-term dollar lease. It is a notable result given that Kenya's existing REITs have traded thinly since 2015, largely because high minimum investment thresholds kept retail investors out, a barrier TRIFIC deliberately lowered to US$1,000. Units begin trading on the Main Investment Market Segment on June 29, with a market-making arrangement already in place to support liquidity once they do.

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