Uganda Cracks Down on Cryptocurrency Fraudsters

The Government of Uganda has launched a nationwide crackdown on digital payment providers facilitating cryptocurrency businesses in the country, warning that such activities are fraught with fraudulent deals, money laundering, sale of illicit goods, and online scams.

Warning Against Illegal Activities

According to a circular issued by the Bank of Uganda (BoU) dated April 29, the regulator is concerned that advertising agents have been marketing mobile money for crypto transactions and vice versa, an illegal business in the country. The statement noted:

“We are also aware that such a conversion cannot happen without the participation of the payment service providers.”

Task Force Established to Explore Cryptocurrencies

The government has established a task force to explore cryptocurrencies and their potential applications in Uganda. This move comes as Uganda’s parliament began criminalizing Ponzi schemes associated with cryptocurrencies last February, which have led to loss of money by many citizens.

Anti-Money Laundering Act Update

Uganda’s Anti-Money Laundering Act is being updated to include providers of virtual assets such as crypto, under the umbrella of regulations under the purview of the Financial Intelligence Authority. Millions have been lost in Uganda to crypto scams, with 5,000 victims of the Dunamiscoins scam petitioning against the operators who allegedly stole approximately $2.7 million from Ugandans.

Notable Cases of Fraud

Dunamiscoins Resources Limited opened in Masaka, a city three hours away from Kampala, promising Ugandans huge returns in its plan to become the country’s “digital currency network.” However, it closed shop after just one month, with more than 10,000 people having lost their money. Five other cryptocurrency firms have reportedly closed shop and vanished with a total of more than $26 million of their clients’ money from October 2019 to February 2020.

Estimated Losses

Robert Bakalikwira, a criminal investigations officer probing the cases estimates that 200,000 Ugandans have lost about $1 billion, or almost 4% of the country’s GDP of $28 billion between 2018 and 2020. The Criminal Investigations Directorate (CID) is holding John Mwangutsya, the director of Crypto Bridge African Limited, suspected to have defrauded Ugandans from different parts of the country of over $1 million.

Government’s Crackdown

Despite continued warnings from the government against the inherent risks of unregulated cryptocurrencies, similar to other parts of the continent, citizens keep falling prey to elaborate scams. The government’s crackdown on cryptocurrency fraudsters is a significant step towards curbing these illegal activities and protecting Ugandan citizens from financial losses.

Warning Against Online Crypto Exchange Marketplaces

State Minister of Finance David Bahati warned citizens against joining online crypto exchange marketplaces such as Binance, Local Bitcoins, Kraken, Cex, Coinmama, OkCoin, and Changelly. “The challenge is that operators of these schemes register as financial institutions but when they get on the ground, their operations are different,” he said.

Conclusion

The government’s crackdown on cryptocurrency fraudsters is a significant step towards curbing these illegal activities and protecting Ugandan citizens from financial losses. It is essential for citizens to be aware of the risks involved in unregulated cryptocurrencies and to report any suspicious activities to the authorities.