The crypto business model is welcome in the Bank of Uganda sandbox

The Bank of Uganda (BoU) has declared that it is willing to accept crypto companies into its regulatory sandbox. The Blockchain Association of Uganda reacted positively to the news. The information was passed on to chairperson BAU by Mr. Andrew Kawere, Director of the Bank of Uganda’s National Payments Service. A portion of the email to BAU was read.

“Your plea to peer learning with our technical staff on crypto-economic models is granted with positivity by BoU. We have investigated whether or not the regulatory sandbox is the right environment for testing certain use cases,” Andrew Kawere said.

Typically, the term “live trial of innovative products and services in a controlled context” relates to the utilization of a “Regulatory Sandbox.” Regulatory sandboxes are becoming increasingly common as the African banking industry evolves. In 2021, the Bank of Uganda (BoU) announced the creation of a regulatory sandbox framework.

This regulatory sandbox framework offers rules and procedures that allow the test of financial innovations in a live-controlled system. The BoU identifies the following functions associated with the sandbox:

• Boost financial sector innovation.
• Find ways to bring in investment money for financial technology companies.
• Make chances for collaborative learning between entrepreneurs and regulators available.

However, cryptocurrencies were not specifically mentioned at the time. The BoU has issued a warning to all payment merchants, notably mobile money companies, to reject cryptocurrency. The bank communicated via a circular sent in May 2022. Many African Central Banks have openly proclaimed regulatory sandboxes. South Africa, Kenya, Ghana, and Zimbabwe are among the countries involved.

On May 6, a senior bank official stated that the Ugandan central bank was examining whether to issue a digital currency. Although the bank had not prohibited crypto, it had concerns about the hazards posed by the technology.

By then, the bank was investigating whether it should explore central bank digital currency. Besides, they were exploring what policy goals it would fulfill. Andrew Kawere, the bank’s manager for national disbursement, commented on CBDC.

“Are we aiming to tackle financial inclusion, payments, or supporting innovations in the economic space? Unfortunately, the query lacks a clear response.”

African countries have taken various approaches to digital currency. For example, before launching its digital currency, Nigeria’s central bank prohibited local banks from dealing with cryptocurrency in 2017.

According to data, there has been an increase in interest in cryptos throughout African countries. Between 2020 and 2021, the value of the African crypto market surged by more than 1,200%. According to the survey, Africa’s cryptocurrency industry was small. Nonetheless, the continent was “one of the most vibrant and exciting” in the world.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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