Bank Of Uganda warns payment service providers to facilitate crypto transactions

In 2019, the government informed Ugandans that cryptocurrencies were not supported by government assets or guarantees. Investors are now considered to be in risk of losing their investment or depleting value.

The Bank of Uganda cautioned the public against using cryptocurrency to conduct business. They claimed that no entity has been granted a license to provide these services.

In a warning on April 29, Andrew Kawere, director of the national payments systems, stated that the Central Bank detected alarmingly some companies advertising cryptocurrency conversion into mobile currency and vice versa.

Recently, the Bank of Uganda (BoU), issued circular advising all payment service providers, especially mobile money operators, not to allow bitcoin transactions.

According to a local newspaper, the Bank of Uganda issued a circular where it expressed concern about some organizations that promoted crypto-to-mobile money conversions.

According to the BoU, the Bank of Uganda noted that advertisements and press reports promoting cryptocurrencies have been reported by the Bank of Uganda.

The bank is also aware that such a change would not be possible without the participation of payment service providers, and/or payment system operators.

Accordingly, the top bank reminded payment participants its position on cryptocurrencies has not changed since 2019 when it stated that financial service providers were not allowed to allow or even trade directly with cryptocurrencies.

The bank declared that it would not hesitate in using its Ugandan law powers if any licensees were found to be in contravention of the directive.

The Bank of Uganda also stated that cryptocurrencies were not legal money. Therefore, holders of such financial assets are not covered if they lose their value. In addition, there are no recompenses available for those who fail to keep their promises.

According to the bank, cryptocurrencies can be used in a wide range of illegal activities such as money laundering, the selling of illegal products and services and fraudulent businesses like Ponzi or pyramid schemes.

Since crypto trading is illegal across many African countries, crypto traders discovered that peer-to-peer (P2P) networks were the best way for them to make crypto transactions.

However, with this new sanction on the country’s only way to trade crypto, the number of people trading in the country is likely to drop dramatically, causing more losses for participants as there may be no place for them to sell their investments.

Additionally, crypto investing has become a popular method for much African youth to escape poverty and establish jobs.

The country could face high youth unemployment as a result of the sanction and an increase in illicit activities.

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