Current Economic Situation in Uganda
Uganda is a landlocked country situated in East Africa. It is a strategic country as it shares borders with countries like Kenya, South Sudan, the Democratic Republic of the Congo, Rwanda, and Tanzania. Uganda is home to about 50 million people, with 1.3 million of the population living in its capital city, Kampala, which is also the country’s financial and economic center.
Source: africanmeccasafaris.com
The economy of Uganda has been expanding over the years—from 4.6% in 2023 to 6.0% in 2024. This growth is projected to hit 7.0% by 2025. However, the Bank of Uganda’s tight monetary policy has set inflation to 5%.
Alt text: An image showing five charts: the real GDP growth, real GDP per capita growth, CPI inflation, budget balance, and the current account of Uganda.
Source: afdb.org
The World Bank attributes this accelerating growth to the agriculture and services sector and a further 10.8% increase by 2026 when oil production starts. However, a slide to 6% is expected when oil production plateaus. The recovery of the tourism sector is also expected to add to this growth.
With proceeds from oil revenues, poverty could be reduced by 40.1% in 2026 from 41.3% in 2024. However, the pace of this reduction also depends on how well households can manage and recover from financial shocks.
Crypto Law in Uganda
The Ugandan government does not regulate cryptocurrencies, and they are not recognized as legal tender. There are no regulations governing crypto and no licensed organization in the country that sells or facilitates its trade. However, citizens who invest or trade these digital assets do so at their own risk.
Source: Tekedia.com
There have been calls to regulate these digital assets from many stakeholders, especially Uganda’s Financial Intelligence Authority (FIA) and the Collaboration on International ICT Policy for East and Southern Africa (CIPESA).
In 2021, FIA asked the Ministry of Finance to come up with a legal framework for these digital assets due to money laundering, terrorism financing, and scam concerns.
Sydney Asubo, the former executive director of the FIA, made this call during a meeting with stakeholders in Kampala. He complained that the regulation is needed due to the failure of the industry participants to meet the FIA’s licensing requirements.
For more context, the FIA, in a bid to curtail crime in the crypto space, amended Uganda’s Anti-Money Laundering (AML) laws to include crypto exchanges and other virtual asset providers (VASPs). However, Asubo revealed that many VASPs continue to operate illegally and fail to identify with FIA.
He further complained that:
“Virtual assets service providers are now in category 16 of the most vulnerable to terrorism financing and money laundering.”
This is why an exhaustive legal framework is needed to regulate the activities of VASPs.
CIPESA, through a policy brief that was released in October 2023, outlined the potential risks and threats that civil society organizations (CSOs), individuals, companies, financial institutions, media, and academics, including students, could potentially face if operations of cryptocurrencies are not checked.
This policy brief analyzed the legislative complexities of cryptocurrencies under the Capital Market Authority, Cap. 84, AML Act, the Foreign Exchange Act of 2004, the Electronic Transactions Act (No. 8 of 2011), the Electronic Signatures Act (No. 7 of 2011), the Computer Misuse Act (No. 2 of 2011), and the National Payment Systems Act (15 of 2020).
Under the reference of the AML, the CIPESA cited the amendment made earlier to include VASPs among the list of accountable persons subject to supervision and monitoring by FIA:
“16. Virtual asset service providers, that is to say, a natural or legal person who conducts one or more of the following activities for or on behalf of another natural or legal person – (a) the exchange between virtual assets and fiat currencies; (b) the transfer of virtual assets; (c) the safekeeping or administration of virtual assets or instruments enabling control over virtual assets or instruments enabling control over virtual assets; and (d) the participation in or provision of financial services related to an insurer’s offer or sale of a virtual asset.”
The CIPESA also discussed case studies, impact, guiding principles, and recommendations for effective cryptocurrency regulation.
Current State of Crypto Adoption in Uganda
Statista reports that the revenue generated by the cryptocurrency market in Uganda is projected to reach US $4.7 million by 2024, with a slight decline to US $4.6 million by 2025.
Source: Statista.com
An average Ugandan contributes around US $23 to the crypto market in 2024, with a user penetration rate of 0.41%.
Source: Statista.com
The number of users of cryptocurrencies is projected to hit 206,100 by 2025 when the user penetration rate is expected to hit 0.40%.
Factors Driving Adoption
This growth is attributed to its tech-savvy population, with an increasing number of startups and local exchanges emerging.
Although not the majority, the increasing growth of the tech-savvy population of Uganda is driven by high mobile penetration, increasing internet access, and a rising inclination towards digital technologies, especially through mobile devices.
Internet users have increased by 10.3% (1.2 million of the population) between January 2023 and January 2024. In the words of Dr. Amina Zawedde, the Permanent Secretary, Ministry of Information Communication and Technology (ICT):
“Uganda has experienced tremendous progress in the telecommunication and ICT industry over the past years. In January 2024, there were 13.30 million internet users in Uganda and the same month Uganda’s internet penetration rate stood at 2% of the total population at the beginning of this year,” Dr Zawedde said.
This growth is fueled by initiatives such as the National ICT Policy and the Digital Transformation Roadmap (2023-2028) by the Ugandan government. This roadmap prioritizes digital literacy, high-speed internet access, and cybersecurity, which are the needed elements for a strong digital economy, especially in the exploration of the ‘crypto verse.’
Crypto-based startups and local exchanges are on the rise in Uganda. These startups offer investments and trading services that are tailored to suit the Ugandan people.
Cryptocurrency Usage in Various Sectors
Aside from the use of cryptocurrencies for local and international payments offered by these startups and international players, blockchain technology is being employed to tackle challenges in other areas such as food and agriculture, and to ensure financial inclusion.
In agriculture, a Ugandan company called Carico Café Connoisseur is using blockchain technology to trace coffee from farms to stores.
Source: furtherafrica.com
In the words of the CEO, Mwambu Wanendeya:
“The idea is to give the consumer an appreciation of what happens on the journey and also to ensure that there are more linkages with the farmer.”
“Traceability is important because people are increasingly concerned that … farmers get rewarded for their work.”
The blockchain here works by ensuring a shared record of data held by a network of individual computers rather than a single party, making it hard to tamper with, and providing a secure way to track goods along the supply chain.
Similarly, in 2017, US-based companies Bext360 and Coda Coffee developed a machine that graded and weighted coffee beans deposited to Great Lakes (a Coda Coffee export partner based in Uganda) by individual farmers in East Uganda.
Source: goexplorer.org
This invention utilizes technologies such as machine vision, AI, IoT, and of course, blockchain.
In 2018, Black Commodities Limited, in partnership with Pure Grow Africa, launched a blockchain-based food commodity ecosystem in Uganda. This project aimed at empowering smallholder farmers through access to cryptocurrency loans (Dala token), affordable fertilizers, and modern agri-business tools.
The initiative focused on boosting farmers’ production from subsistence to commercial levels, with plans to scale to about 50,000 farmers and expand across sub-Saharan Africa.
In 2024, the Blockchain Association of Uganda announced the launch of the KitePesa, a stablecoin project pegged to the Ugandan Shilling.
Source: bsvblockchain.org
This project aims to ensure financial inclusion by providing lower transaction costs, better domestic interoperability (including smart contracts and traditional banks), and enhanced network reliability.
Challenges Facing Crypto Adoption in Uganda
The adoption of cryptocurrencies in Uganda faces challenges ranging from regulatory concerns, digital literacy and infrastructure inefficiency, scams and Ponzi schemes, and volatility issues.
Source: Villanovau.com
Let us explore these in detail:
Unclear Framework
The lack of a clear legal framework governing cryptocurrency creates a gray area filled with mistrust, which limits participation from individuals and institutions, hence lowering interest in these virtual assets.
Digital Divide and Literacy Concerns
Internet users in Uganda are 13.30 million. This is quite commendable for a sub-Saharan nation, although considering its total population, it is quite low. The fact that cryptocurrency transactions only work with the internet raises concerns.
This decline could be attributed to a larger portion of Ugandans residing in rural areas, digital illiteracy about these virtual assets, and blockchain technology.
Source: World Bank
In 2020, the World Bank reported that about 34 million Ugandans reside in rural areas, while 11 million live in urban settlements. This divide comes with lesser digital exposure, internet, and electricity accessibility in the former than in the latter.
Volatility
Another issue is the volatile nature of these virtual assets. This makes them a very risky venture for everyday use, especially in an economy filled with many low-income earners.
Scams and Crypto-based Ponzi Schemes
Ugandans are no strangers to crypto scams and Ponzi schemes from international and local companies. This article by the BBC explores how thousands of Ugandans fell for the OneCoin scam.
Source: blog.dartafrica.io
In 2020, there was another scam targeted at investors and employees by Dunamiscoin Resources Limited, a local-based crypto company in Masaka, Uganda.
These experiences pose threats to the adoption of cryptocurrencies.
The Potential for Cryptocurrency in Uganda
The National Labour Force Survey carried out in 2021 by the Uganda Bureau of Statistics shows that 87% of the population is unbanked. Cryptocurrencies could cater to these populations who only require a mobile phone and the internet to enjoy its services.
Let us not forget the lower costs of transfer fees for local and especially international payments. Cryptocurrencies facilitate cheaper transactions at a quicker pace.
For an economy such as Ugandan which is filled with low-income earners, crypto has the potential to improve the financial status of investors and traders and the economy at large.
Conclusion
The adoption rate of cryptocurrencies in Uganda is quite impressive in comparison to neighboring countries in the East-Africa region. The call for robust regulation from government agencies, civil societies, and the private sector shows a positive sign towards a potential legal framework to govern these virtual assets.
The future indeed is bright, as the digital divide is slowly narrowing due to the government’s intervention and efforts of other stakeholders. However, more work is needed to cement a solid foundation and bridge the divide for crypto to stand and thrive.
