Attention!
Crypto Currency transactions by consumers or investors are not protected by government regulations or oversights.
The National Payment Systems Act, 2020 which regulates payment systems in Uganda was not designed with crypto-currencies in mind.
Silver Kayondo V Bank of Uganda Misc. Cause No. 109 of 2022(Civil Division): judgment delivered on 24th April 2023 by His Lordship Ssekaana Musa.
Background to the case.
The Applicant filed an application for judicial review against the Respondent seeking a declaration that crypto assets and currencies are legitimate digital assets tradable in the digital economy among other declarations and orders. The major issue for determination by the High Court was in relation to the facilitation of crypto currency transactions by entities that are licensed via the National Payments System.
Judgment of the Court
The High Court agreed with the submissions of Counsel for the Respondent finding that crypto-currencies and assets are illegal, unlawful and unacceptable as general instruments of payment. The High Court further stated that:
- The National Payment Systems Act, 2020 was enacted to regulate payment systems in Uganda. The Act was enacted to provide for the safety and efficiency of payment systems as well as provide for the functions of the central bank in relation to payment systems.
- The Respondent is mandated by the Constitution and Section 4 of the National Payment Systems Act, 2020 to regulate, supervise and oversee the operations of payment systems in order to ensure their safety and efficiency. It has the duty to protect the general public from such unregulated schemes which are yet to be recognized in our national payment system.
- Crypto- currencies under the current National Payment system are illegal or unlawful and they are not accepted as a general payment instrument. Crypto currencies are digital assets that are designed to effect electronic payments without participation of the central authority or intermediary as a Central Bank or licensed Financial institution.
- The Respondent has a duty to warn the public about the attendant risks associated with crypto currencies or crypto assets before they fall prey for schemes disguised as digital economy where there is anonymity of the real players, money-laundering or other illegal activities thrive.
- Crypto currency transactions by consumers or investors are not protected by government regulations or oversight. The current regulatory framework was not designed with crypto currencies in mind.
Effect of the Court’s judgment
This landmark judgment has clearly stipulated the position of the law in regard to digital currencies in Uganda. In as much as a growing number of the public is engaging in the trading of the same, there is no legal protection available to them in the event that they fall prey to unscrupulous players who are most times anonymous or in the event that the highly volatile and speculative digital currency market collapses.
Concluding observations.
Certain countries in the world for example, Germany, Denmark, Japan, Switzerland & Spain have legalized the trading in digital currencies albeit with strict compliance regulations to combat the fluidity and susceptibility of digital currency to money laundering ventures.
It is therefore clear that it is a matter of “when” not “if digital currencies shall be recognized alongside “physical currencies”. It therefore follows that the most prudent thing for governments to do is to ensure that there are strict compliance checks in place as opposed to flatly banning the future of currency in the world.
