Reports indicate Uganda's state finance minister, David Bahati, has responded to parliamentary concerns over operators posing as cryptocurrency dealers. He spoke of government plans that will apply to both cryptocurrencies and pyramid schemes, the latter of which are also prevalent in the country: "In October, Cabinet approved the National Payment System Bill. We intend to bring it to Parliament next month so that it caters for all these forms of digital financial transactions."
Members of the Ugandan Parliament have raised concerns that the government has provided no framework of supervision or legislation, allowing the illegitimate schemes to take hold. One MP, Mathias Mpuuga, spoke of Ripcoin, Namecoin, and Telex Free, and called unregulated actors "a potential bomb."
Though the Central Bank of Uganda has warned investors to be cautious, the new bill is the first formal step by the country to create a legal framework for cryptocurrency operators to function within the law and to deter bad actors.
Kwame Rugunda, chair of the Blockchain Association of Uganda, told ETHNews that Ponzi schemes, often operating as multi-level marketing or pyramid schemes, have been "a problem for many years" in the country, adding: "Ugandans are familiar with these, and now the Ponzi schemes are either using cryptocurrencies or purporting to be crypto businesses and the Central Bank has warned society about them."
Rugunda also provided examples of common scams in the country, calling them a "menace."
"The most common of them is called One Coin promoted by the One Life Network; others include D9, DRC Gold coin, Telex Free, Onyx Coin, Billion coin, etc. They unfortunately distort the proper understanding and great opportunity that crypto enables."
He explained that citizens who seek investment opportunities are "repetitively fleeced by these Ponzi schemes, and there are numerous court cases."
Cryptocurrency adoption in Africa, outside of South Africa, has been relatively slow but is growing. Binance recently launched Binance Uganda, a local fiat-to-cryptocurrency exchange where users can buy Bitcoin and Ethereum with the Ugandan shilling. Binance said it had two goals for this: firstly, to increase economic activity in Uganda and wider Africa, and secondly, to provide education, as well as a secure way to buy cryptocurrencies. Local interest in Binance Uganda has been strong, Rugunda confirmed.
When asked if the Binance development may have impacted the move toward cryptocurrency regulation, Rugunda said:
"Binance has engaged the various authorities in Uganda, and such large companies often prefer to work in regulated environments and to work with the governments where they operate. In Uganda, they have engaged the regulatory bodies and offered to share their global experience as Uganda puts in place its policies and regulatory frameworks."
Though there is little information on the scope of the new National Payment System Bill, more may become apparent when it goes to the Ugandan Parliament in December 2018. Other East African countries, namely Kenya and Tanzania, are now looking at similar bills, with Kenya directly following Uganda's lead.
Although cryptocurrencies appear to have been quickly adopted by bad actors within Uganda, the new regulations may allow more legitimate cryptocurrency use to come to the fore in the country, where blockchain adoption is garnering attention.
The Blockchain Association of Uganda organized the largest blockchain conference in Africa in May 2018, attended by 800 delegates from 23 countries. In response, and with the support of Ugandan President Yoweri Museveni, a national task force is now investigating blockchain and other fourth industrial revolution technologies.
In addition, Rugunda told ETHNews the Central Bank of Uganda has created a blockchain working group and regulatory sandboxes are now emerging to encourage blockchain innovation.