Bank of Uganda welcomes digital asset companies to its regulatory sandbox

Digital asset firms will now be able to participate in a regulatory sandbox run by the Bank of Uganda. The regulator invited the country’s leading blockchain advocacy organization to work together and share knowledge on appropriate digital asset integrations, a month after it banned financial institutions from facilitating Bitcoin transactions.

In a letter to the Blockchain Association of Uganda dated June 1, the bank said it welcomed the organization’s offer to “share knowledge with our technical teams on crypto business models and whether certain cases of are eligible for regulatory sandbox testing”.

The central bank launched the sandbox a year ago, in June 2021. At the time, it said the initiative would “spur innovation in financial services, attract capital and funding for businesses financial technology and would provide shared learning opportunities for innovators and regulators”. It would target the promotion of electronic payments, digital financial services and financial inclusion, he said. The announcement did not refer to digital assets or blockchain technology.

The invitation to the sandbox comes just a month since the bank banned all financial institutions from engaging in or facilitating digital asset transactions.

In May, the bank’s director of national payment systems, Andrew Kawere, released a statement saying the bank had seen an increase in the number of payment service providers that facilitated digital asset transactions. Kawere banned such activities, reminding institutions that the central bank had not authorized any payment company to engage in digital currency transactions.

However, digital currencies are not illegal in Uganda. Citizens can hold, sell or buy Bitcoin as the regulations are ambiguous, like in many other African countries.

Earlier this year, Minister of State for Finance David Bahati noted that one of the biggest challenges for the government is regulating entities that offer bitcoin without obtaining the required licenses.

“The challenge is that the operators of these systems register as financial institutions, but when they get on the ground, their operations are different,” he noted.

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