The Bank of Uganda has advised the public against using cryptocurrencies to do business, claiming that no entity has been permitted to provide the services.
Mr Andrew Kawere, the director of the national payments system, said in an April 29 notice that the Central Bank has observed with alarm certain firms promoting cryptocurrency conversion into mobile money and vice versa, which he claims is unlawful.
“The Bank of Uganda has taken notice of news stories and advertisements informing the public that cryptocurrency may be converted into mobile money and vice versa.” We are also aware that such a conversion cannot take place without the involvement of payment service providers and payment system operators.
This is to inform you that the Bank of Uganda has not authorised any institution to sell or facilitate the exchange of cryptocurrencies. According to a circular signed by Kawere, this is consistent with the official government stance stated by the Ministry of Finance, Planning, and Economic Development in October 2019.
Kawere has warned that anybody or institution implicated in the trading of such cryptocurrency would face severe penalties.
“As a result, this is a warning to all licensed organizations under the National Payment Systems Act of 2020 to stop supporting crypto currency transactions.” “The Bank of Uganda will not hesitate to use its powers under Section 13(l) (b) and (f) of the NPS Act, 2020 for any licensees found to be in violation of the aforementioned order,” Kawere stated in the notification.
Although the government has not formally acknowledged bitcoin as a legal payment mechanism in the nation, Uganda is home to a number of cryptocurrency startups.
This is not the first time the government has issued a warning to the public about the dangers of utilizing cryptocurrency in commercial transactions.
“The government of Uganda does not recognize bitcoin as legal cash in Uganda and has not approved any business in Uganda to sell cryptocurrencies or enable trading in cryptocurrencies,” declared Finance Minister Matia Kasaija in 2019.
He further said that the government has not licensed any company in Uganda to sell cryptocurrencies or facilitate cryptocurrency exchange, and hence these firms are not controlled by the government or any of its institutions.
“As a result, unlike other financial asset owners who are protected by government regulation, holders of cryptocurrencies in Uganda do not have any consumer protection should the value attributed to their holdings of cryptocurrencies depreciate, or should the organization enabling the use, holding, or trading of cryptocurrencies fail to fulfill the services or value they have promised for any reason,” he added.
According to him, most crypto-currencies, such as Bitcoin and Ethereum, are not backed by assets or government guarantees, thus holders are entirely exposed to the risk of loss or falling value since the issuers are not required to swap them for legal money or other value.
Minister Kasaija said that cryptocurrencies’ values fluctuate swiftly over time, and that although holders may benefit when their value increases, they are vulnerable to losses when their value falls.
“Because of the nature of crypto-currencies, they are appealing for use in illicit operations such as money laundering, the selling of illegal products and services, and fraudulent ventures such as ponzi and pyramid schemes.”
Finally, the public is encouraged to assess the dangers involved with cyber-currencies and exercise prudence before engaging in transactions with such items,” he stated.
Cryptocurrency is any kind of digital or virtual money that employs encryption to safeguard transactions.
Cryptocurrencies lack a centralized issuing or governing body, instead relying on a decentralized system to record transactions and issue new units.
It is a digital payment system that does not depend on banks for transaction verification. It’s a peer-to-peer payment system that allows anybody, anywhere to send and receive money.
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