The Ministry of Finance, Planning and Economic Development and the Central Bank have urged Ugandans to stay away from cryptocurrencies saying government does not recognize any crypto-currency as legal tender and its use in Uganda.
The Minister of Finance, Planning and Economic Development, Matia Kasaija said in a news conference in Kampala on Monday that the government of Uganda has noted the emergence of the practice of using, holding and trading crypto-currencies in Uganda.
“This is to inform the general public that: - the government of Uganda does not recognize any crypto-currency as legal tender in Uganda. The government of Uganda has not licensed any organization in Uganda to sell crypto-currencies or to facilitate the trade in crypto-currencies and so these organizations are not regulated by the government or any of its agencies,” Mr Kasaija said.
Uganda now joins close to 100 other countries that have publically warned their citizens against the use cryptocurrencies.
According to Mr Kasaija, most crypto-currencies such as Bitcoin and Ethereum are not backed by assets or government guarantees, therefore holders of these crypto-currencies are fully exposed to the risk of loss or diminishing value as the issuers are not obliged to exchange them for legal currency or other value.
Crypto-currencies are digital assets that are designed to effect electronic payments without the participation of a central authority or intermediary such as a Central Bank or licensed financial institution.
Crypto-currencies may therefore be used to effect anonymous electronic payments or bought and held for speculative purposes in the expectation that their value will rise at a future time, whereupon they could be sold for a profit.
Hundreds of crypto-currencies have been designed and launched around the world, and the most well-known examples include Bitcoin and Ethereum. Such crypto-currencies are not issued or regulated by any government or central bank.
Mr Kasaija said unlike other owners of financial assets who are protected by government regulation, holders of crypto-currencies in Uganda do not enjoy any consumer protection should they lose the value assigned to their holdings of crypto-currencies, or should organization facilitating the use, holding or trading of crypto-currencies fail for whatever reason to deliver the services or value they have promised.
Since in nature, the crypto-currencies tend to change value rapidly over time, Mr Kasaija said while holders of crypto-currencies may make profits when their value rises, they will be exposed to losses when their value falls, adding that the nature of crypto-currencies make them attractive for use in criminal transactions such as money laundering, sale of prohibited goods and services, and fraudulent venture such as Ponzi and pyramid schemes.
Mr Kasaija said the public is advised to appraise themselves of the risks associated with cyber-currencies, and exercise caution before they make transactions involving such products.