Bank Of Uganda Warned Traders Against Cryptoasset Business

The Central Bank of Uganda (BoU) has warned citizens against using Bitcoin and other forms of cryptocurrencies for business.

The central bank has not allowed any company to offer services related to cryptocurrencies. This comes a few months after the government allocated land to American singer Akon for the construction of a smart city called 'Akon City', where cryptocurrencies will be used.

In February 2022, the Ugandan government promised to provide AKON with land to enable the construction of a $6 billion futuristic smart city that would fully utilize the cryptocurrency AKOIN. On April 2, 2021, Akon visited Uganda at the invitation of President Yoweri Museveni to discuss investment and key business opportunities in energy, tourism, infrastructure and cryptocurrencies, as well as technology, including the dream of 'one Africa, one Koin' that the rapper has preached on the continent.

The president wanted to be part of the group that would transform Africa's infrastructure and financial sector by building futuristic cities powered by smart technologies such as Akoin cryptoasset, blockchain, artificial intelligence, etc. When Museveni invited Akon to invest in cryptoassets, the asset was not even recognized as legal tender in Uganda, but the president was fully supportive of this type of disruptive financial technology. This gave a small glimmer of hope that the asset would soon be recognized and regulated.

Crypto traders: BoU warns traders not to do business online

In a letter dated April 29, 2022, Andrew Kawere, director of the National Payments System, shared that the BoU has been watching with concern some businesses promoting the conversion of crypto assets to mobile money and vice versa, which he believes is illegal. 

Under the leadership of new Deputy Governor Michael Atingi-Ego, the BoU banned the use of cryptocurrencies in the country on May 2. Atingi-Ego advised Ugandans not to get involved with these cryptocurrencies because if they go belly up, you have nowhere to turn - you just lose your money. 

This is because there are still no regulations for cryptocurrencies in Uganda and most parts of the world. He added that government authorities do not know the owners and locations of these cryptocurrencies. Therefore, Ugandans should not come up with narratives like "I have a cryptoasset and this is the rate of return in it." The Deputy Governor told the crypto-maniacs not to be deceived and not to engage in cryptocurrency activities.

This is not the first time the Central Bank has expressed pessimism about cryptocurrencies. During the July 2019 Blockchain Conference in Kampala, President Museveni supported blockchain and cryptocurrencies, expressing optimism that these tools would transform the country's struggling ICT, agriculture, services, and manufacturing sectors. However, when the late Professor Emmanuel Mutebile, then governor of the Bank of Uganda, stood up to address attendees, he advised nationals against engaging in cryptocurrencies and revealed that the BoU has a plan to ban all such form of digital assets.

The late Mutebile even instructed the BoU to issue a warning to inform the public about the risks associated with cryptocurrencies. Those Ugandans who did not heed the BoU's warning ended up losing more than 10 billion UGX (about $2,813,400) to a fake cryptocurrency company called Dunamiscoins Resources Limited.