What you need to know:
- Cryptocurrency is any form of currency that exists digitally or virtually and uses cryptography to secure transactions.
Bank of Uganda has warned the public against using cryptocurrencies to transact businesses, saying the Central Bank has not licensed any company to offer the services.
Mr Andrew Kawere, the director of national payments system, in a notice dated April 29, said the Central Bank has noted with concern some entities advertising conversion of cryptocurrencies into mobile money and vice versa, which he said is illegal.
“Bank of Uganda has noted press reports and adverts advising the public that they can covert crypto currencies into mobile money and vice versa. We are also aware that such a conversion cannot happen without the participation of the payment service providers and or payment system operators. This is to advise that Bank of Uganda has not licensed any institution to sell cryptocurrencies or to facilitate the trade in crypto-currencies. This is in line with the official government position as communicated by the Ministry of Finance, Planning and Economic Development in October 2019,” a circular signed by Kawere reads.
Kawere warned that anyone or entity involved in dealing in such cryptocurrencies will face stern consequences.
“Accordingly, this is to warn all licensed entities under the National Payment Systems Act, 2020 to desist from facilitating crypto currency 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,” Kawere said in the notice.
Uganda is home to a number of cryptocurrency companies, although government has not officially recoginsed the currency as a legal payment system in the country.
This is not the first time government has come out to warn public against using cryptocurrencies in transacting businesses.
In 2019, Finance minister Matia Kasaija said : “The government of Uganda does not recognise cryptocurrency as the legal tender in Uganda and has not licensed any organisation in Uganda to sell cryptocurrencies or to facilitate trade in cryptocurrencies.”
He added that government has not licensed any organisation in Uganda to sell cryptocurrencies or to facilitate the trade in cryptocurrencies and so these organisations are not regulated by the Government or any of its agencies.
“As such, unlike other owners of financial assets who are protected by government regulation, holders of cryptocurrencies in Uganda do not enjoy any consumer protection should they lose the value assigned to their holdings of cryptocurrencies, or should the organisation facilitating the use, holding or trading of cryptocurrencies fail for whatever reason to deliver the services or value they have promised,” he said.
According to him, 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.
Minister Kasaija said cryptocurrencies tend to change value rapidly over time and that while holders may make profits when their value rises, they will be exposed to losses when their value falls. “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. In conclusion, the public is advised to appraise themselves of the risks associated with cyber-currencies, and exercise caution before they make transactions involving such products,” he said.
Cryptocurrency is any form of currency that exists digitally or virtually and uses cryptography to secure transactions.
Cryptocurrencies don’t have a central issuing or regulating authority, instead using a decentralised system to record transactions and issue new units.
It is a digital payment system that doesn’t rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments.