Uganda’s Finance Minister, Matia Kasaija, has said that the government will not be held responsible for any loss of money to organizations selling cryptocurrencies or some other digital currency.
The minister, while speaking with reporters at the Uganda Media Center this week, issued a stern warning to Ugandans who invest in digital currencies, saying that the government and the country’s apex bank does not recognize cryptocurrency as a legal tender, meaning citizens are on their own.
Cryptocurrencies use encryption techniques to regulate the generation of currency units and verify the transfer of funds. They operate independently of all central banks, meaning that the system behind is handled anonymously.
Across Africa, promotional posts for several cryptocurrencies flood the social media space, trying to get people to invest in them. However, Uganda has not licensed any organization in the country to sell cryptocurrencies or to facilitate the trade in the currencies, according to the Kasaija.
Giving reasons for the government’s stance on cryptocurrencies, the official stated that digital currencies are exposed to risks, such as fraud. Also, the fact that they are not backed by any assets makes it a high-risk venture where clients are liable to lose everything without any form of compensation.
“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 (any) organization facilitating the use … fail for whatever reason to deliver the services or value they have promised,” Kasaija said.
Although virtual currencies are widely accepted in developed countries, where people can mine the coins and get hard cash via machines, most African countries such as Uganda do not possess such infrastructure.
Regardless of the lack of transparency and high-risk tendency associated with cryptocurrency, Africa is poised to be the next frontier for the digital currency. As a matter of fact, experts hold that conditions on the continent are ‘great’ for virtual currency to thrive.
A survey of 7,000 people from across Africa, Europe, and South-East Asia by digital currency firm Luno shows that Africans are more open to cryptocurrencies than their counterparts from other continents.
But in Uganda, the central bank does not “believe” cryptocurrencies meet all the characteristics of genuine currency. This is according to Richard Mayebo, an Executive Director at Bank of Uganda, who said that the government is telling Ugandans to go into such investments well-aware of the risks involved.
“The public is advised to appraise themselves of the risks associated with cyber-currencies, and exercise caution before they make transactions involving such products,” Kasaija added.
There is also the issue of lack of regulation on the use of online cryptocurrency in Uganda, as pointed out by Dr Louis Kasekende, the Deputy Governor of Bank of Uganda.
“Let me state clearly that the online cryptocurrency businesses are not regulated at the moment and therefore carry a significant risk of loss of savings, with no recourse to protection or insurance by government,” Kasekende said.
The Ugandan government’s warnings on digital currencies come at a time when Facebook’s plan to launch its own global virtual currency – Libra – is under scrutiny from United States authorities, European governments and international banks over the company’s plans for the cryptocurrency and issues of regulation.