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Dealing in Cryptocurrencies such as Bitcoin, Ethereum, etc remains illegal in Uganda after the High Court maintained the Bank of Uganda’s position to effectively ban Cryptocurrency transactions in Uganda.
High Court Judge Musa Ssekaana last week found that the Bank of Uganda is empowered under the Constitution of Uganda to ensure monetary stability and general soundness of the Ugandan economy and therefore was legally justified when last year it warned “payment service providers” against facilitating transactions in Crypto – a form of money that has proven highly volatile.
Judge Musa Ssekaana was presiding over a Case filed by Lawyer Silver Kayondo against the Bank of Uganda challenging that directive where he argued the Central Bank did not have the mandate to ban Cryptocurrency in Uganda as such a legal position lacks the backing of the law since cryptocurrency is essentially unregulated in Uganda.
On its part, the Bank of Uganda denied banning cryptocurrency in Uganda per se and argued that it simply warned “payment service providers” against handling cryptocurrency transactions which would be beyond the scope of their licenses.
Without the input of these “payment service providers,” no conversions of money into cryptocurrency and vice versa can happen.
“ The argument of the Applicant’s counsel [ Silver Kayondo] that cryptocurrencies are unregulated under the law or Uganda’s legal regime and should be allowed to operate freely is fallacious, totally misleading and baseless.
Being unregulated does not mean that the Applicant can operate without sanction or contrary to the present and existing currency system.
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The respondent [Bank of Uganda] should not look on as the Applicant contends without ensuring stability of the currency by admitting every undefined system as a legal tender as this would risk and bypass the regulated payment system of the central bank.
It is clear that the Applicant intended to legitimize digital assets as being tradable in the digital economy so that they are legalized via the national payment system. The cryptocurrencies are indeed digital assets that are designed to effect electronic payments without participation of the Central Authority or intermediary as a Central Bank or a licensed financial institution. Crypto-Currencies under the current National Payment System is illegal or unlawful and they are not accepted as a general payment instrument. “Justice Musa Ssekaana ruled.
According to Uganda’s Ministry of Finance, Cryptocurrency is a form of digital or virtual money that is not backed by government guarantees or assets and its value is highly unstable as it “rapidly” increases and decreases.
The lack of government oversight on cryptocurrency makes it very susceptible to abuse by criminals while at the same time rendering its users vulnerable and without government protection.
“ As such, unlike other owners of financial assets who are protected by government regulation, holders of cryptocurrencies in Uganda do not enjoy any consumer protection should they lose the value assigned to their holdings of cryptocurrencies, or should the organisation facilitating the use, holding or trading of cryptocurrencies fail for whatever reason to deliver the services or value they have promised”The Ministry of Finance said in a Statement.
“ The nature of crypto-currencies makes them attractive for use in criminal transactions such as money laundering, sale of prohibited goods and services, and fraudulent ventures such as ponzi and pyramid schemes.”It added.
In response to the Court Ruling, Lawyer Silver Kayondo posted on his LinkedIn page several reasons explaining what he termed as its wrongfulness.
Most importantly, the lawyer argues that the question of whether or not cryptocurrency is illegal or not did not arise during the trial of his case suggesting Justice Ssekaana pronounced himself on a question that was never put before his Court.
Benjamin Ahikiiriza is a Legal Writer And Digital Communications & Marketing Specialist majoring in Lawyers, Law Firms And the larger Legal Sector.
Benjamin currently Works as the Director of Content and Business Development At LegalReports.