Digital currencies are not regulated in Uganda, and no entity has been licensed as a virtual asset service provider in the country, the Bank of Uganda has claimed in its latest warning against the burgeoning industry.
Andrew Kawere, the Director of National Payment Systems at the central bank, noted in a recent circular that the bank had noticed several ads for digital currency services and products flooding the local market. Some of these advertise the conversion of digital currencies into mobile money and vice versa, which according to him, is illegal in the East African country.
“Bank of Uganda has noted press reports and adverts advising the public that they can covert crypto currencies into mobile money and vice versa… This is to advise that Bank of Uganda has not licensed any institution to sell cryptocurrencies or to facilitate the trade in crypto-currencies,” the circular read, as reported by a local newspaper, the Daily Monitor.
The regulator further shot a warning to financial institutions in the country who have been facilitating digital currency transactions, reminding them that this is a violation of their licenses under the National Payment Systems Act, 2020.
“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 stated in the notice.
Uganda has seen an explosion in digital currency adoption despite the regulatory ambiguity. While the government has previously indicated that it has not legalized digital currencies, it has also never categorized them as illegal, leaving the citizens to make their own assumptions about the state of regulations.
This ambiguity has also led to the rise of scammers who know that the power of the authorities is limited by the lack of clear policies. One of the biggest scams was Dunamiscoin, a project that reportedly made off with close to $3 million back in 2019. Another scam known as Crypto Bridge African Limited defrauded about $850,000 from its victims earlier this year.
While it hasn’t termed digital currencies illegal, the Bank of Uganda has categorically ruled them out as legal tender.
“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,” Matia Kasaija, the country’s Minister of Finance, previously stated,