Bank of Uganda agrees to have crypto in its regulatory sandbox
Regulatory sandboxes are becoming popular as the landscape of the banking sector in Africa continues to change
Bank of Uganda (BoU) has stated that it is open to considering crypto firms into the bank’s regulatory sandbox.
The Director of Bank of Uganda’s National Payments Service Andrew Kawere passed the information to the chairperson Blockchain Association of Uganda (BAU) who received the news with positivity.
Part of the email to BAU 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.
The term live trial of innovative products and services in a controlled setting typically refers to the use of a “Regulatory Sandbox.”
Regulatory sandboxes are becoming popular as the landscape of the banking sector in Africa continues to change.
The Bank of Uganda (BoU) announced in 2021 that it would be developing 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.
In a circular sent out in May this ye lolar, the Central bank warned all payment merchants, particularly mobile money operators, to reject cryptocurrency.
Many Central Banks have publicly announced regulatory sandboxes in Africa. Some countries include South Africa, Kenya, Ghana, and Zimbabwe.
Uganda’s hard stance on crypto
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.
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 had different approaches toward digital currencies. For example, before introducing its digital currency, the central bank of Nigeria banned local banks from working with cryptos in 2017.
Kawere said they did not have timelines for investigations or establishing a digital currency. But they were mainly focusing on hazards associated with the technology.
Protecting the interests of our clients is one of the most important things for us to do as the Bank of Uganda. In Uganda, our level of understanding regarding digital and online finances is quite low. In general, people need some protection from rather advanced financial innovations.
Data suggests that there has been a rise in interest in cryptos across African nations. The value of the crypto market in Africa increased by more than 1,200 percent in one year between 2020 and 2021.
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