Uganda's central bank is considering issuing a digital currency and not banning cryptocurrencies. But the central bank also has concerns about risks from the technology including consumer protection and financial inclusion.
"The Bank of Uganda is currently conducting a preliminary study on whether a central bank digital currency should be considered or not, particularly exploring what policy objectives it will address," Andrew Kawere, the bank's director for national payments, told Reuters (7/5).
African governments have approached digital currencies differently. Nigeria's central bank banned local banks from working with cryptocurrencies last year before launching its own digital currency. While the Central African Republic last month adopted bitcoin as its official currency, its first in Africa.
Kawere says they have no deadline to complete their studies or issue digital currency. But they specifically focus on the risks surrounding the technology.
"Consumer protection - this is a very big concern for us as the Bank of Uganda. In Uganda we have low levels of digital financial literacy," he said.
Kawere said access would also be a problem when launching such a currency due to the low penetration rate by necessary infrastructure such as smartphones, computers and the internet.
Cryptocurrencies are already used informally in Uganda, Kawere said, but the central bank has warned licensed payment service providers to slow it down while regulators study the technology and develop regulatory mechanisms.
Uganda has received the equivalent of about $4.8 billion worth of cryptocurrency between March 2019 and March 2022, according to blockchain data platform Chainalysis.
“So the Bank of Uganda is not banning cryptocurrencies, we are just applying some speed brakes,” Kawere said.
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