The high Court has dismissed an application which sought to quash a Bank of Uganda directive that barred licensed entities and individuals from facilitating crypto transactions.
In his ruling, Justice Musa Ssekaana insisted that the central bank’s crypto prohibition does not amount to an infringement on property rights. Instead, the directive is an attempt by the central bank not to legalize the “undefined system as a payment instrument in Uganda.”
On April 29, 2022, Bank of Uganda issued a circular stating that it had not licensed any institution to sell crypto currencies or to facilitate the trade in crypto currencies. The bank therefore warned all licensees under the National Payments Act to desist from facilitating crypto currency transactions.
The applicant Silver Kayondo filed a judicial review application in the High court seeking declarations that the circular issued by the Bank of Uganda was issued without prior consultation of the industry players, was procedurally wrong, discriminatory, arbitrary, unfair, unjust and unlawful.
Mr Kayondo sought declaration that crypto assets and cryptocurrencies are legitimate albeit unregulated assets, tradable in the digital economy and can be liquidated/cased out via mobile money and other payment systems in settlement quashing the circular issued by the Bank of Uganda and prohibiting its implementation, as well as as damages for losses arising from market disruptions.
It was argued for bank of Uganda that the circular was issued pursuant to its powers under the National Payment Systems Act and the Constitution of the Republic of Uganda.
It was further argued that by virtue of its mandate under the law, the Central Bank could forbid its licensees under the law from any activity that it considers a threat or risk to economic stability.
However, in ruling against Kayondo’s application, Justice Ssekaana said the BOU acted appropriately when it issued the directive.
“The applicant by bringing this case intended to legitimize digital assets in the National Payments System Crypto currencies are indeed digital assets that are designed to effect electronic payments without participation of a central bank or a licensed financial institution. Crypto currencies under the current National Payment System are illegal or unlawful and they are not accepted as a general payment instrument,” he said.
Justice Ssekaana further asserted that it would be wrong and illegal for the applicant to use court to impose the unrecognized crypto currency into the regulated framework of the National Payment System.
The judge also added that the BOU has a duty to warn the public about the attendant risks associated with crypto currencies before the public fall prey to schemes, particularly those which facilitate anonymity of the real players, money laundering or other illegal activities.
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