BY SALIM KALANZI
The Bank of Uganda (BOU) is considering new amendments to financial laws to create room for the adoption of a central bank digital currency in the near future.
A central bank digital currency is a digital form of central bank money that may be accessible to the public (general-purpose or retail), or to a select set of licensed participants such as financial organizations.
George Wilson Sonko, a performance measurement analyst at BOU told the East African that they are studying laws put up by other countries such as Kenya and Jamaica to aid their case studies.
“We are studying the idea of a Central Bank Digital Currency with the aid of case studies developed by peer central banks in Jamaica, Nigeria, Ghana, and Kenya among others. The law does not accommodate digital currency use in Uganda but we are exploring legal options for future amendments in financial laws that will facilitate circulation of digital currency denominations,” said Sonko.
“Digital currencies rely a lot on blockchain technology, which creates a big investment burden on its ecosystem in form of human resources like data scientists.
“The rollout of a digital currency in Uganda will be anchored on execution of high value financial transactions that may be processed at a cheaper cost on a blockchain platform compared with the Real Time Gross Settlement System and mobile money platforms,” said Sonko.
Blockchain technology is one of the fourth industrial revolution technologies that has attracted massive global interest from financial and non-financial stakeholders.
Beyond its application in cryptocurrency, blockchain is viewed as a revolutionary technology with the potential to change the way governments and institutions manage data as well as doing business.
Globally, there is an accelerating shift towards digital payments and the ownership and use of digital currency. Sonko did not put any timelines on these ongoing developments.
Innovations in technology are driving discussions and development of new forms of money with which the public can interact.
The way global leaders – from public and private sectors – develop, coordinate and regulate such digital currencies will have profound implications on society’s capacity to harness their compelling benefits and avoid the potentially significant risks they introduce.
In 2018, President Museveni and the late BOU Governor Emmanuel Tumusiime Mutebile on the role of new technologies on the development of the financial sector.
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Mutebile argued that the emergency of cryptocurrencies should not divert Ugandans from the role played by central banks as stewards of public trust.
“Cryptocurrencies do not have the privileges of legal tender and are not backed by the central bank, which ensures the supply of the currency is always adequate with the demand,” he said.
But Museveni encouraged the Governor to embrace technology advancement since it will enable quick service delivery. A government task force was thereafter put in place to study blockchain technology and their use case of cryptocurrencies.