The Government has finalized consultations and the drafting of the National Payments System Bill, a law that intends to regulate electronic payments in Uganda and requires electronic money issuers among others to obtain a license from BOU.
80% of payments are made in cash, electronic payments (cashless) account for a mere 20%. However, cash payments have tremendously risen up with in the past decade due to telecommunication companies providing mobile money and internet services to their customers.
The access to web based services has eased communication and enabled Ugandans to access financial trends like crypto-currency, which were previously not available in our jurisdiction. Many people have invested in crypto -currencies with expectation of high returns and others are buying goods and services using crypto- currencies.
The Bill defines electronic money as electronic value stored electronically. Crypto currency brokers take a recognized currency from a depositor in exchange for a crypto currency. The crypto- currency is then deposited to the electronic account of the depositor held by a broker. As such, crypto currencies are indeed a form of electronic money envisioned under the Bill. There are so many crypto currencies, which include; Bitcoin, Ethereum, Litecoin etc.
Sharp price fluctuations in the value of Bitcoin was a point of concern to Bank of Uganda; in 2018, it issued a statement discouraging Ugandans from investing and using crypto currencies.
The Bill will require electronic money issuers to incorporate locally, open statutory bank accounts with licensed financial institutions and issue electronic money equivalent to cash held on statutory bank accounts. All electronic payment operators will require a license with the exception of commercial banks who are primarily licensed to provide payment services.
In a twist of events; BOU, that had earlier slated crypto-currency brokers, now assumes regulatory control over them, I thus presume, that BOU has finally “seen the light”. That said, BOU needs to prepare and build capacity among its staff in order to effectively regulate crypto- currencies brokers.
Lastly, consultations on the Bill were reserved for major institutions like Banks and public entities. Local small-scale market operators were not consulted at all; in fact, there is a concern in the market regarding how BOU will “balance the boat”. Some ingenious banks have gone ahead to start private payment gateways, this raises critical antitrust practices which are not addressed in the Bill.
Bank of Uganda needs to move with the times and embrace crypto currencies.
Capital Markets Lawyer and an Affiliate member of CISI London.