Ugandan central bank u-turns on crypto welcoming firms to regulatory sandbox

The Bank of Uganda is open to the idea of cryptocurrency businesses participating in its Regulatory Sandbox, inviting members of the Blockchain Association of Uganda (BAU) to share their knowledge with the central bank.

A letter from the bank dated June 1 to the chairperson of the BAU, Kwame Rungunda, referred to a meeting between the two parties in early May. The central bank also advised the country’s crypto advocacy group to brush up on the sandbox regulations before it made time for further technical discussions.

We look forward to working with @BOU_Official and all other stakeholders in shaping the opportunity for crypto in Uganda, while proactively mitigating the potential risks and ensuring consumer protection. @CmaUganda @FitspaUG https://t.co/L8CMi4Fo5f

— Blockchain Association of Uganda (BAU) (@blockchainug) June 4, 2022

In June 2021, the bank launched a regulatory sandbox framework allowing for financial technology (FinTech) firms to test “innovative financial solutions” in a controlled environment in the hopes of promoting the uptake of electronic payments and other digital financial services within the country.

The recent letter appears to be a u-turn in the Bank of Uganda’s approach toward cryptocurrency.

In late April, the bank issued a warning regarding cryptocurrencies, sending a notice to all payment service providers in the country saying that by allowing crypto transactions they were opening the country to money laundering and scams.

It added that any provider such as a bank or fintech business found to be facilitating the trade of cryptocurrencies would have their financial license revoked.

Crypto is not banned in Uganda and can still be purchased, held, and traded. However, cryptocurrencies are not regulated, and a firm is yet to be issued a digital asset license to operate in the country.

Related: Venture funding for African crypto startups grew 11x in 2022: Report

Crypto adoption in Africa is heating up, catching the attention of many venture funds and crypto firms. Between 2020 and 2021 crypto use in Africa increased by nearly 1,200% and nearly 2% of Ugandans use crypto.

Around the continent, other countries are adopting a crypto-friendly approach, the Central African Republic became the first African country to adopt Bitcoin (BTC) as a legal tender and only the second country ever to do so.

The state-owned Kenyan energy company KenGen also invited Bitcoin miners to move to the country to buy up its excess power generated from geothermal energy, which could see its government generate revenue through crypto mining fees or taxes.