• Sat. May 21st, 2022

Uganda’s central bank weighs on digital currency issuance

ByHazel R. Lang

May 6, 2022

KAMPALA, May 6 (Reuters) – Uganda’s central bank is considering issuing a digital currency and has not banned cryptocurrencies, but is concerned about technology risks including consumer protection and inclusion financial situation, a senior bank official said on Friday.

“The Bank of Uganda is currently carrying out preliminary studies on whether or not to consider a central bank digital currency … and in particular is exploring the policy objectives it would meet,” director Andrew Kawere told Reuters. of the bank’s national payments, in an interview. .

“Is it financial inclusion that we want to solve, is it payments, is it to support innovations in the financial space? That’s an unanswered question.”

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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, an African first. Read more

Kawere said they don’t have a timeline for concluding their studies or issuing a digital currency, but said they are particularly focused on technology-related risks.

“Consumer protection – this is a very big concern for us as Bank of Uganda. In Uganda we have low levels of digital financial literacy…the people need a bit of protection against some of these fairly advanced financial innovations.”

Kawere said access would also be an issue when deploying such a currency due to low levels of penetration of necessary infrastructure such as smart phones, computers and the internet.

“It could lead to financial exclusion for those who don’t have access (to currency).”

He said the bank has reservations about the volatility of cryptocurrencies which he says undermines their ability to function as a store of value.

Cryptocurrencies were already being used informally in Uganda, Kawere said, but the central bank has warned licensed payment service providers to slow them down while the regulator studies the technology and develops regulatory mechanisms.

Ugandans received cryptocurrency worth around $4.8 billion between March 2019 and March 2022, according to blockchain data platform Chainalysis.

“So Bank of Uganda didn’t ban cryptocurrency, we just applied speed brakes,” Kawere said.

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Reporting by Elias Biryabarema; edited by Rachel Savage, George Obulutsa and Toby Chopra

Our standards: The Thomson Reuters Trust Principles.

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