Cryptocurrency Compliance Issues Rock Uganda: Experts Say CMA Has Jurisdiction to Regulate

Uganda’s cryptocurrency industry has been thrown into chaos as experts argue that the Capital Markets Authority (CMA) has jurisdiction to regulate digital assets. The controversy stems from a recent statement by the Bank of Uganda, admitting crypto-currency entities into its payment systems regulatory sandbox.

The Controversy

The Bank of Uganda’s move has sparked debate among experts who contend that this action is illegal and unconstitutional. They cite Section 1 of the CMA Act which defines securities as financial instruments, options, futures, and investment contracts provided they are managed collectively on behalf of third parties for profit or interest. Experts argue that cryptocurrency falls under this definition, making the CMA the appropriate regulatory body.

The Impact

The World Bank estimates that in 2018, 17 million Bitcoins had been created with an aggregated value of USD 138,000,000. Today, market capitalization for crypto assets stands at $1 trillion. Despite these positive developments, Uganda’s reluctance to adopt a known regulatory approach to cryptocurrencies has raised concerns.

Historical Context

According to Nakamoto’s white paper (2008), cryptocurrencies were created to achieve a decentralized electronic cash system managed peer-to-peer without intervention of a regulator. However, experts argue that this assumption is wrong and that government regulation is necessary for the financial sector.

Recent Developments

In May this year, JP Morgan published a report stating that Bitcoin was undervalued by 28% and recommended it as an asset class. With such positive developments, experts are puzzled as to why Uganda is reluctant to adopt a regulatory approach.

Regulatory Efforts

The CMA has been proactive in regulating crypto currencies, with several exchanges worldwide being granted licenses to trade digital assets. In Kenya, for instance, the Capital Markets Authority (Kenya) has regulated crypto-currencies as securities.

Expert Opinion

Experts argue that Uganda’s government agencies, including the Bank of Uganda and CMA, are on a trial-and-error strategy which is self-destructive. They call upon the CMA to establish a regulatory sandbox to entertain innovations rather than avoiding them.

Call to Action

The Blockchian Association of Uganda has expressed interest in being regulated, but government agencies have maintained that there is no law to support such regulation. Experts urge the CMA to exercise its mandate under the law to enhance development and ensure compliance with cryptocurrency regulations.

Conclusion

Experts argue that the government’s approach to cryptocurrencies violates the right to development and its role to develop the country. They urge the CMA to take action to regulate the industry, ensuring a safe and secure environment for crypto-asset service providers.