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Fraudulent Activities Rock Cryptocurrency Scene in Uganda as Central Bank Opens Door for Regulatory Sandbox

The Bank of Uganda has finally given the green light to cryptocurrency businesses to participate in its regulatory sandbox, a move that comes with hopes of curbing fraudulent activities plaguing the industry.

Background

According to a letter dated June 1, addressed to the chairperson of the Blockchain Association of Uganda (BAU), Kwame Rungunda, the Bank of Uganda invited members of the BAU to share their knowledge on crypto-economic models with its technical staff. This move is seen as a positive step towards addressing the concerns surrounding cryptocurrency activities in the country.

Regulatory Sandbox

The regulatory sandbox refers to the live trial of innovative products and services in a controlled setting, which has become increasingly popular in Africa’s rapidly changing banking landscape. The Bank of Uganda announced plans to develop a regulatory sandbox in 2021, but cryptocurrencies were not explicitly mentioned at that time.

Investigation into Digital Currency

Despite initial reservations about cryptocurrency, the Bank of Uganda is now investigating whether to issue its own digital currency. While the bank has not banned crypto outright, it has expressed concerns about the risks associated with the technology.

Fraudulent Activities in Crypto Landscape

Despite these efforts, fraudulent activities remain rampant in Uganda’s crypto landscape. Recent cases include a scam involving Dunamiscoins, which led to 5,000 victims losing $2.7 million. Between October 2019 and February 2020, five crypto firms ceased operations in Uganda, leaving customers with losses totaling over $26 million.

Interest in Cryptocurrencies

The vulnerability of Ugandans in crypto transactions is significant, yet many people remain interested in exploring the space. The incorporation of crypto businesses into the regulatory sandbox could provide a platform for assessing how best to control fraudulent activities and advancing the model.

Rise of Cryptocurrency Adoption in Africa

Data suggests that interest in cryptocurrencies has risen across African nations, with the value of the crypto market in Africa increasing by over 1,200 percent between 2020 and 2021. Other countries on the continent are adopting a more crypto-friendly approach, including the Central African Republic, which became the first African country to adopt Bitcoin as a legal tender.

Uncertain Future for Cryptocurrency in Africa

For now, the future of cryptocurrency in Africa remains uncertain, but this development could be a step towards addressing the concerns surrounding fraudulent activities in Uganda’s crypto landscape.