Govt Warns Public on Risks Associated with Crypto-currencies

Minister for Finance, Matia Kasaija

Government has cautioned the public that no form of crypto-currency has yet been recognized by the government as legal tender.

Crypto-currencies are digital assets that are designed to effect electronic payments without the participation of a central authority or intermediary such as a Central Bank or licensed financial institution.

These currencies may therefore be used to effect anonymous electronic payments or bought and held for speculative purposes in the expectation that their value will rise at a future time, whereupon they could be sold for a profit.  

Hundreds of crypto-currencies have been designed and launched around the world, and the most well-known examples include Bitcoin and Ethereum. Such crypto-currencies are not issued or regulated by ant government or central bank.  

On Monday, the Minister of Finance, Matia Kasaija told reporters in Kampala that the government of Uganda does not recognize any crypto-currency as legal tender in Uganda. 

“The government of Uganda has not licensed any organization in Uganda to sell crypto-currencies or to facilitate the trade in crypto-currencies and so these organizations are not regulated by the Government or any of its agencies,” he said.  

The Minister added that unlike other owners of financial assets who are protected by Government regulation, holders of crypto-currencies in Uganda do not enjoy any consumer protection should they lose the value assigned to their holdings of crypto-currencies.

There is still no protection should an organization facilitating the use, holding or trading of crypto-currencies fail for whatever reason to deliver the services or value they have promised.   

He alerted the public of the risks associated with most crypto-currencies such as Bitcoin and Ethereum which are not backed by assets or government guarantees.

“Therefore holders of these crypto-currencies are fully exposed to the risk of loss or diminishing value as the issuers are not obliged to exchange them for legal currency or other value,” Kasaija said.  

Crypto-currencies tend to change value rapidly over time, the Minister said, adding that by implication, users of crypto-currencies risk being exposed to losses when their value falls.  

He also revealed that given their nature, crypto-currencies are easily used in criminal transactions such as money laundering, sale of prohibited goods and services, and fraudulent venture such as Ponzi and pyramid schemes.   

Kasaija advised the public to appraise themselves of the risks associated with cyber-currencies, and exercise caution before they make transactions involving such products.

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