Clearing the air

Uganda’s Central Bank Has Explicitly Blacklisted Cryptocurrencies

By  |  May 5, 2022

Less than a week ago, it became widely known that the Central African Republic (CAR) has adopted Bitcoin as an additional legal tender while green-lighting the adoption of all kinds of cryptocurrency. 

One would expect that for an economically challenged and landlocked market to be so open to digital currencies, becoming the first in Africa and the second country in the world [after El Salvador] to adopt BTC, other African governments would see a need for a shift in perception. 

However, not quite. Elsewhere, authorities seem to be retaining the iron fists with which they have always dealt with crypto. The newest market in the no-crypto category is Uganda, an East African nation whose digital ecosystem just began opening up to the trends and realities sweeping across the continent’s fast-developing tech terrain. 

The Bank of Uganda (BoU) has, like most other central banks across the region, put out a notice which reads that it has not granted a license to any company, person, or group of persons to offer cryptocurrency services in the country. By virtue of this notice, locals risk losing money invested in the financial asset class. 

“This is to advise that the Bank of Uganda has not licensed any institution to sell cryptocurrencies or facilitate the trade in cryptocurrencies. This is in line with the official government position communicated by the Ministry of Finance, Planning and Economic Development in October 2019,” the circular read. 

According to the said circular, the Finance Ministry said that despite the emergence of the practice in the country, the holders have to contend with the associated risks because crypto transactions are not issued or regulated by any government or central bank in any part of the world. 

“Accordingly, this is to warn all licensed entities under the National Payment Systems Act, 2020 to desist from facilitating cryptocurrency transactions. Bank of Uganda shall not hesitate to invoke its powers under Section 13(l) (b) & (f) of the NPS Act, 2020 for any licensees that will be found in breach of the above directive,” the Bank explained.

In the last few years, cryptocurrencies have become popular among Ugandans. Per this report, Chipper Cash. one of Africa’s most valuable fintech products, launched a crypto feature in Uganda which saw an adoption rate of 194 percent. Thanks to unusual inflation rates, Ugandans are increasingly turning to crypto, similar to occurrences in economies like Zimbabwe, Botswana, Kenya, Tanzania, and Nigeria, among others. 

Frankly, the Bank of Uganda’s apprehensions regarding crypto is not completely unfounded. The country has had its fair share of crypto-related scams, all of which have affected unsuspecting citizens who do not have a profound understanding of the industry. Such ponzis have, in a way, turned Uganda into an unlikely hub for crypto-based frauds. 

One report has it that no less than 5 crypto firms closed up shop, carting away a cumulative USD 26 M worth of clients’ money in the 6 months leading up to February 2020. According to [criminal] investigations, about 200,000 Ugandans have lost roughly USD 1 B to crypto boondoggles, which is almost equivalent to 4 percent of the country’s USD 28 B GDP.

In the year which ended June 2021, Africa amassed a record USD 105. 6 B worth of crypto, majorly buoyed by peer-to-peer (P2P) transactions in the grass-root growth markets. However, while the continent leads the rest of the world in adoption, volumes are yet on the lower side. 

Needfully said, governments across Africa are concerned that fully legalizing cryptocurrency would usher in more uncontrollable cases of money laundering and other kinds of economic crimes. Meanwhile, CAR’s adoption of Bitcoin as official currency has been met with criticisms, primarily due to the country’s current economic disposition.

Featured Image: Times Next

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