The headline was screaming “Bank of Uganda (BoU) Blacklists Cryptocurrencies in Uganda” and all of a sudden I received a flurry of messages telling me about this apparently sad news. The sadness conveyed by the message recipients is only based on one’s full understanding of the cryptocurrency space as well as the future of money.
The truth of the matter is that BoU does recognise cryptocurrencies and is only trying to play catch-up hence the kind of moves you see them making. Like many other Central Banks world over, they were caught flatfooted when the likes of Bitcoin took center stage and on studying the decentralised manner of the cryptocurrencies, even got more scared.
Central Banks world over are known to have been and some continue to be averse towards cryptocurrencies. The Bank for International Settlements, a global body for Central Banks in a 2021 report stated: “Central banks stand at the centre of a rapid transformation of the financial sector and the payment system. Innovations such as cryptocurrencies, stablecoins and the walled garden ecosystems of big techs all tend to work against the public good element that underpins the payment system.”
The same institution did, however, endorse the development of digital currencies backed by central banks, saying they could be a tool to achieve greater financial inclusion and lower the high costs of payments. In other words they acknowledge the benefits that cryptos present but will not embrace them because they lack control.
Behind the scenes, the Bank of Uganda has commissioned studies on cryptos and even begun toying with the idea of setting up a digital currency. They know that they cannot beat them, hence the desire to at least copy them. Some countries have already gone ahead to set up what they call Central Bank Digital Currencies (CBDC) and while they mimic cryptos, they are marginally different. The bottom-line is that the CBDC allows the central banks to retain control of the currency unlike the cryptocurrency approach that does not tolerate centralised control.
The possibility of losing control of currencies scares the crap out of the Central Banks because they will be rendered useless. Same to banks. The end to end approach of transacting that cryptos introduced combined with the anonymity simply made them the darling of the free world.
It is a fact that BoU commissioned a study on CBDC and is in the process of revising the country’s financial laws (if it has not happened already). This is to therefore encourage you out there who have dived into the crpto world that it is going no where and no entity will frustrate it successfully. It is defining the future of currency and financial interaction. The players likely to be left biting the dust upon successful adoption of cryptocurrencies are numerous and unless they mutate, the writing is on the wall. This initial skepticism is going to cost the banking sector time.
Let us briefly look at the statistics because they do not lie.
As of May 1st 2022, the market capitalisation for cryptocurrencies was 1.68 Trillion Dollars way high up there compared to a market capitalisaion of 8.2 Billion Dollars during 2014.
Bitcoin, the most popular crypto has a market capitalisation of 731.99 Billion dollars
The market capitalisation of cryptocurrencies today is over 1 Trillion Dollars and for the kind of organisation that our Central Bank is, I highly doubt they are aloof about all this. Decentralised Finance (DeFi), Non Fungible Tokens, Meme Coins among other are beginning to attract alot of interest hence the predictable move towards the entrenchment of Cryptocurrencies.
My advice to Ugandans, do not lose heart with such pronouncements. The truth is that Decentralised Financing is creating a renaissance in the finance industry. It is an emerging financial technology based on secure distributed ledgers, that eliminates the control held by banks and other financial institutions. It is going to shake up the entire Finance industry and render the current day banks impotent if they do not re-invent themselves. Do not rule out the exit of Central banks too. I know this may be farfetched but just like people laughed off the introduction of motorised cars when horses were the in-thing.
CryptoCurrencies are here to stay. Love them, hate them….
Business and Technology Consultant