Imagine a young software developer in Kampala. He’s just finished building a smart-contract application that could help farmers track produce payments without relying on brokers.
He’s hopeful, energized, but frustrated. Because while his app runs on cryptocurrency protocols, Uganda doesn’t recognize any of that as legal tender.
His innovation, though technically sound and globally viable, floats in a legal grey zone.
That’s not just his dilemma—it’s Uganda’s.
Back in October 2019, Finance Minister Matia Kasaija declared before the country that government does not recognize any cryptocurrency as legal tender.
It was a firm stance, probably grounded in caution, but one that now feels increasingly out of step with the breakneck pace of global digital transformation.
Before this, deceased former Bank of Uganda Governor Emmanuel Tumusiime Mutebile had strongly warned against mainstreaming cryptocurrencies, only to be diffused by President Museveni at a conference in Kampala, who noted that whereas there was need to be cautious, it was dangerous to lock out innovations, given the rapid changes in the financial landscape.
Sitting on the fence
As technology shape-shifts to serve modern society, more and more countries are not only embracing but actively designing frameworks to accommodate cryptocurrencies.
Uganda, however, seems to be sitting on the fence—torn between innovation and uncertainty.
But here’s the rub: Uganda cannot afford to be caught at the tail end of this digital revolution.
The country is already making major strides in electronic commerce, mobile payments, and digital finance.
Even as an agro-based economy, the country is a nation constantly looking to streamline socio-economic transactions.
Banks now support agro-based accounts, foreign exchange dealers operate in app-driven environments, and Investment Clubs and capital market participants are increasingly exploring the digital space.
In fact, mobile money has outpaced traditional banking.
The 2023 FinScope survey indicated that 66% of Ugandans use mobile money, compared to only 13% who use commercial banks, a surge largely due to accessibility and convenience.
Interestingly, Uganda was ahead of its time in 2011, passing a trio of cyber laws—the Computer Misuse Act, Electronic Signatures Act, and Electronic Transactions Act—to support the emerging digital landscape.
These pieces of legislation signalled that the country was willing to lean into the future.
However, while they provide a general foundation for electronic transactions, they stop just short of mentioning cryptocurrencies directly.
That silence isn’t golden—it’s problematic. Because in regulation, ambiguity breeds paralysis.
A robust regulatory framework doesn’t just protect users—it creates confidence.
It tells innovators, investors, and institutions what the rules are, where the risks lie, and how to build within or around them.
That’s why other countries have gone beyond statements and crafted real legal structures around crypto—whether to embrace, regulate, or restrict it, at least the lines are drawn.
Uganda, meanwhile, is stuck in vague statements from the Ministry of Finance and Bank of Uganda.
The paradox here is that the legal framework doesn’t address crypto directly, but it does touch on themes that affect its usage.
Encryption, digital contracts, electronic signatures—these are the bedrock of cryptocurrency transactions.
So even as government distances itself from crypto, its existing laws inadvertently overlap with crypto infrastructure. It’s a legal paradox wrapped in political hesitation.
Yet, the 1995 Constitution seems to nudge its population in the other direction.
Objective IX mandates government to encourage private initiatives and self-reliance for national development by stimulating technological and scientific development through sound policy and enabling legislation.
In short: if tech knocks, government must open the door.
This is something that suggests that creating a clear, forward-looking legal framework for cryptocurrency is not just an option but a constitutional responsibility and with tech evolution accelerating, the demand for legal clarity is no longer niche—it looks urgent.
It has potential to compel farmers to tokenize produce supply chains, real estate to blockchain-based smart deeds and developers to build exportable Fintech products from Kampala to Kigali.
But not in a vacuum of ambiguity.
Still, the process of regulation cannot be impulsive. Crypto is borderless, volatile, and unforgiving of mistakes—a misplaced decimal can mean millions lost.
There is a school of thought that says a cautious, consultative approach is needed, one that takes into account the interests of banks, startups, regulators, consumers, and those skeptical of crypto altogether.
Because the goal isn’t to jump on a shiny bandwagon but to craft a roadmap that protects citizens while enabling innovation.
Glaring trade-offs
Some research notes from the Collaboration on International ICT Policy for East and Southern Africa (CIPESA)—a non-profit that works to promote effective and inclusive ICT policy and practice for improved governance, livelihoods, and human rights in Africa—reveals some glaring trade-offs in the crypto stance.
One of the core strengths of cryptocurrencies lies in their peer-to-peer networking structure, which eliminates the need for traditional intermediaries like banks or brokers.
By cutting out the middlemen, transactions become more transparent, efficient, and accountable, leaving little room for manipulation or bureaucratic drag.
The decentralized nature of many cryptocurrencies only amplifies this benefit. Unlike fiat currencies, which are centrally controlled by government, cryptocurrencies are often governed by developers or user communities through consensus mechanisms.
This decentralization offers greater stability and security, particularly in regions where trust in centralized institutions is low or inconsistent.
Another major advantage is the robust security and privacy architecture embedded in cryptocurrency systems.
Through advanced encryption and blockchain technology, transactions are locked in end-to-end, making it difficult—if not near impossible—for unauthorized parties to tamper with them.
Each transaction is unique, confidential, and occurs directly between two parties, reinforcing privacy in a world increasingly sensitive to data breaches.
As the ecosystem expands, it’s also fueling job creation: demand is growing for blockchain developers, cybersecurity professionals, smart contract engineers, and others in emerging crypto-driven industries like decentralized finance (DeFi), digital asset exchanges, and blockchain-based remittance platforms.
Threats not to be glossed over
However, there are weaknesses that can’t be glossed over. While the crypto itself is highly secure, the platforms on which users interact—crypto exchanges—are far more vulnerable.
Many exchanges store user data and wallet credentials, making them prime targets for cyberattacks.
A single breach can mean massive losses for thousands. Add to that the irreversible nature of crypto transactions: if funds are sent to the wrong address, they are gone for good.
That’s not just risky—it’s ripe for exploitation, with dishonest users possibly taking advantage of the finality to evade responsibility or cheat others.
Far riskier than can be imagined
Zooming out, the macroeconomic risks are just as significant.
The strong privacy protections that make crypto appealing also make it attractive for illicit activity—money laundering, terrorism financing, tax evasion—the whole financial underworld toolkit.
And then there’s the issue of private keys: lose your key, and you lose your coins. There’s no “forgot password” link in the blockchain. It’s a high-stakes memory game with real financial consequences.
Even more concerning is the potential erosion of monetary policy tools.
If individuals and businesses increasingly move their savings and transactions into crypto, it undermines the central bank’s ability to control inflation, stabilize the currency, or manage interest rates.
In economies like Uganda’s—where such tools are vital levers—this shift could destabilize financial governance and complicate efforts to regulate capital flows.
So while the promise of cryptocurrencies is undeniable—efficiency, security, innovation—the trade-offs are anything but negligible.
Uganda’s legal fog
Currently, no cryptocurrency is recognized as legal tender in Uganda, and no organization has been licensed to sell or facilitate crypto trading.
However, given that crypto asset practices intersect with various domains of finance and investment, existing Ugandan laws can be interpreted—at least in part—as applicable to them.
Under the Capital Markets Authority Act (Cap. 84), cryptocurrencies can be seen as securities.
Thus, they can fall within the regulatory ambit of the Capital Markets Authority (CMA).
Section 1(hh)(iii) defines securities to include “any right, warrant, option, or futures in respect of any debenture, stocks, shares, bonds, notes or commodities.”
Given this broad scope, security tokens and other crypto assets could be interpreted as securities, making crypto issuers subject to CMA regulation.
The Anti-Money Laundering Act and Its 2020 Amendment –The Anti-Money Laundering (Amendment of Second Schedule) Instrument expanded the definition of “accountable persons” to include Virtual Asset Service Providers (VASPs).
VASPs are defined as individuals or entities conducting the transfer of virtual assets, safekeeping or administration of virtual assets, or provision of financial services relating to the sale of a virtual asset.
As such, anyone involved in these activities must register with the Financial Intelligence Authority (FIA). This provision aims to increase accountability and curb fraud and criminal misuse of crypto platforms.
The Foreign Exchange Act (2004) –Section 3 defines foreign exchange to include “banknotes, coins or electronic units of payment in any currency other than Uganda’s which are or have been legal tender elsewhere.”
Because cryptocurrencies are recognized as legal tender in some jurisdictions, this section could—at least theoretically—classify them as a form of foreign currency.
The Electronic Transactions Act (2011) governs electronic communications and transactions, including “automated transactions”, defined as transactions conducted, in whole or in part, via data messages without human review.
The Act’s objectives include facilitating electronic communication and transactions, removing legal and operational barriers to digital commerce.
Given this scope, crypto-related transactions (such as those involving payment tokens or crypto-linked Exchange-Traded Products) could fall under its purview—even if cryptocurrencies are not explicitly mentioned.
The Electronic Signatures Act (2011) recognizes electronic signatures and digital authentication, including provisions related to the use and control of private keys.
Section 2 defines what it means to “rightfully hold a private key,” emphasizing non-disclosure and lawful possession.
This is particularly relevant for cryptocurrency users who rely on private keys for wallet access and authentication.
The Computer Misuse Act (2011) addresses cybersecurity, unauthorized access, and misuse of information systems.
Section 5 defines “authorized access” as access by a person who is entitled or has consent.
The decentralized and pseudonymous nature of blockchain means unauthorized access to wallets or systems by actors outside the peer network can be prosecuted under this Act.
The National Payment Systems Act (2020) grants Bank of Uganda the power to regulate payment systems and issue directives to ensure their efficiency and safety.
Under Section 4(1), the central bank has the authority to supervise payment systems, issue circulars and guidelines regulating system operators.
It is under this Act that Bank of Uganda has prohibited licensed entities from facilitating crypto transactions, asserting its mandate to protect the integrity of Uganda’s financial system.
A growing paradox
Uganda presents a paradox. Crypto usage is growing rapidly, but the legal system has yet to formally recognize digital assets.
The Finance Ministry estimates that by January 2025, over Shs2.5 trillion worth of crypto transactions occurred in 2024 alone—clearly signaling a fast-growing but unregulated market.
The Bank of Uganda has repeatedly warned against using cryptocurrencies, particularly via mobile money platforms.
In 2022, a nationwide crackdown was launched against payment providers facilitating crypto transactions.
Bank of Uganda issued stern warnings to mobile money operators and Fintech firms, citing links to fraud, illicit trade, and scams.
Court filings suggest Ugandans lost over $1 billion between 2018 and 2020 to fraudulent crypto-related schemes.
Institutional disconnect
Legal experts like Louis Kizito, a partner at Pentagon Advocates, identify three main causes behind Uganda’s regulatory delay – lack of technical understanding, political inertia, and absence of pressure from international institutions such as the IMF or World Bank.
According to Kizito, part of the problem lies in fragmented regulatory mandates—between Bank of Uganda, CMA, Uganda Insurance Regulatory Authority, and others, all of whom struggle with crypto’s borderless and fast-evolving nature.
As a result, many crypto entrepreneurs are relocating to jurisdictions like Mauritius and Dubai, where legal clarity exists.
Kizito recommends a “twin peaks” model, akin to South Africa’s framework, which separates market conduct regulation from financial stability supervision.
Meanwhile, Uganda’s posture remains one of legal ambiguity, institutional resistance, and reactive enforcement.
Yet the need for a structured legal response has never been greater.
Courtroom precedent
One pivotal case in the crypto debate is Miscellaneous Cause No. 109 of 2022, brought by Silver Kayondo against Bank of Uganda.
The applicant sought declarations affirming that crypto assets are legitimate, tradable digital assets that can be liquidated for Uganda Shillings via mobile money.
The court dismissed the case.
Justice Ssekaana Musa ruled that under current laws—specifically the National Payment Systems Act—cryptocurrencies are neither legal nor recognized payment instruments.
He affirmed Bank of Uganda’s authority to issue directives to licensees, adding that the central bank had a duty to warn the public against crypto-related risks, including fraud, money laundering, and regulatory uncertainty.
Energy Ministry Orders UEDCL Board to Investigate Top Management Over Performance Gaps“No one can claim lawful operation of a system not recognized by the legal system,” he ruled.
This ruling underscores Uganda’s position: crypto is not recognized, not licensed, and not protected under existing laws. Yet it also raises new legal ambiguity.
The catch-22 in regulation
CIPESA points out a contradiction: while existing laws (like the Electronic Transactions Act or the Anti-Money Laundering Act) contain technological neutrality, the Kayondo ruling suggests they cannot be relied upon to legally recognize cryptocurrencies.
This creates a legal tug-of-war. On one side, there’s room to argue that broad digital legislation is enough to govern cryptocurrencies. On the other, courts appear to demand explicit crypto-specific laws before conferring legitimacy.
Had the court ruled in Kayondo’s favour, it might have set a precedent validating crypto assets within Uganda’s legal framework.
Instead, the ruling further emboldens Bank of Uganda’s cautious stance and reinforces crypto’s undefined status in Uganda’s economy.
When you widen the conversation to the vast East African region, you begin to see a fascinating trend unfold: the region is increasingly becoming a testing ground for the future of digital finance, where the promise of cryptocurrencies clashes with the gritty realities of governance, taxation, and economic ambition.
On one hand, digital assets are gaining serious traction among millions of users and entrepreneurs across East Africa’s three largest economies—Uganda, Kenya, and Tanzania.
On the other hand, these three countries are charting vastly different regulatory paths through the $14 billion crypto market, according to the 2024 Geography of Cryptocurrency Report by Chainaly-sis, a New York–based blockchain analytics firm.
This divergence is reshaping cross-border trade, investor sentiment, and tech policy, exposing both the potential and the pitfalls of a fragmented regional approach—just when global interest in Africa’s digital economy is peaking.
A regional tug-of-war
Uganda, as previously discussed, remains mired in a legal vacuum, tangled in bureaucratic inertia.
Kenya, by contrast, is pushing ahead with a progressive regulatory stance, spearheaded by its Virtual Asset Service Providers (VASP) Bill.
Tanzania, meanwhile, has opted for a tax-first strategy, imposing levies even without a supporting legal framework—creating a complex and at times contradictory snapshot of how governments are trying to embrace innovation while taming its risks.
The impact? Kenya leads the region in crypto transaction value, clocking in at $7 billion in 2024.
Uganda follows at $5 billion, and Tanzania comes in at around $2 billion, according to the latest Chainalysis data.
This indicates that even without formal frameworks, crypto adoption is advancing—regulatory clarity isn’t always a prerequisite for market momentum.
Interestingly, Tanzania and Uganda’s high transaction values are being driven by a boom in stable-coin usage, which grew by 53% and 50%, respectively in 2024—outpacing Kenya’s 30% growth in that segment.
Still, Kenya remains the regional crypto heavyweight, largely due to its near-mature ecosystem, buoyed by its evolving legal environment.
Kenya is home to about four million crypto users, followed by Uganda’s two million, and Tanzania’s 1.5 million, according to Chainalysis.
Kenya’s balancing act
Kenya’s legislative momentum has drawn praise and criticism alike.
The VASP Bill, now under deliberation in Parliament and expected to be passed before year-end, is being touted as a comprehensive framework that seeks to regulate all players in the crypto ecosystem—from wallet providers to exchanges to traders.
It builds on a digital asset tax introduced in 2023, initially pegged at 3%, and later halved to 1.5%.
But while Kenya’s regulatory maturity is paying off in terms of investor confidence and global credibility—particularly in anti-money laundering (AML) and counter-terrorism financing (CTF) compliance—it’s also raising fears of overregulation.
One of the biggest concerns among day traders and institutional players is that taxation precedes clarity.
The government now requires platforms to assess, convert, and remit taxes on all asset movements within five working days—a demand that insiders say is technically and operationally burdensome, even for large global exchanges, let alone smaller local startups.
What’s missing is clarity on fundamentals: who qualifies as a taxpayer, what counts as a taxable event, and how compliance should be monitored.
These grey areas risk hurting innovation, confusing participants, and pushing Kenya dangerously close to losing its competitive edge in crypto leadership.
Tanzania’s tax-first gamble
Tanzania is taking notes from Kenya’s fiscal script. The Finance Act of 2024 amended the Income Tax Act (2019) to introduce a 3% withholding tax on crypto-related payments made to residents by non-resident platforms or entities facilitating such transactions.
The definition of “digital asset” here is broad—covering cryptocurrencies, tokens, and NFTs—but the regulatory framework is missing.
The Bank of Tanzania still maintains a cautious tone, having warned the public repeatedly about trading or using cryptocurrencies.
This has created a curious dissonance: taxation exists, but there are no licensing or operational guidelines. As blockchain consultant Sandra Chogo in Dar es Salaam put it: “We still don’t have the regulations, so practically, collecting tax is almost impossible.”
The Yellow Card case offered a stark illustration. The dispute, in which the crypto trading platform was to repay a former employee $1.193 million for alleged fund mismanagement, effectively validated crypto transactions as taxable under Tanzanian law.
The court ruled that absence of regulation does not equate to illegality, stating that the crypto space is still evolving, and referencing guidance already issued by the government and central bank.
That ruling has emboldened many users, who now equate taxation with legitimacy.
Yet without full regulation, the risks around investor protection, enforcement, and fraud remain unresolved.
The challenge of harmonisation
Both Kenya and Tanzania demonstrate vastly different ways of responding to crypto’s rise.
Kenya is chasing compliance and investor trust. Tanzania is banking on early tax revenues without the full scaffolding of regulation.
Uganda, meanwhile, remains stuck in neutral, despite surging transaction volumes.
This lack of harmonization across East Africa presents challenges cross-border arbitrage by traders looking for laxer rules, confusion for startups operating regionally, and missed opportunities for regional integration in digital finance.
It’s now fair—if not urgent—to call for a harmonised legal framework for cryptocurrency regulation across East Africa.
Entrepreneurs, especially those in cross-border remittances and decentralised finance (DeFi), are navigating a maze of inconsistent, conflicting rules that threaten to stifle innovation before it scales.
Consider Uganda. It’s exceedingly difficult to launch a DeFi startup and attract venture capital in an environment plagued by regulatory ambiguity.
Investors typically avoid high-risk territories, and uncertainty is the ultimate risk multiplier.
Even Kenya, often praised for its progressive stance, risks becoming a victim of its own regulation.
Should its VASP Bill become too restrictive, it could choke the very innovation it seeks to nurture.
Overregulation, in this case, could lead to an exodus of talent and capital to jurisdictions with clearer, more enabling frameworks.
Indeed, Kenya’s VASP Bill might serve as a regional model, but unless carefully calibrated, it could tip the balance toward policy rigidity.
Uganda’s laissez-faire approach, meanwhile, could birth the next big breakthrough—or complete regulatory chaos. Tanzania’s tax-first model is bold but brittle—like taxing a house before building its foundation.
Some global players, such as Binance, advocate for a hybrid ecosystem—where central bank digital currencies (CBDCs) coexist with decentralised assets.
But such coexistence only works where there is regulatory clarity, public education, and strong consumer protections—ingredients still missing in much of Africa.
Continental fractures
Zooming out, this regulatory fragmentation is continental. According to the 2024 Africa Blockchain Report (released June 26 by CV VC and Absa Bank), only seven African countries have enacted well-defined cryptocurrency laws.
In contrast, 35 countries have vague or uncertain regulatory environments. Seven have implicit bans, and five have outright bans.
Progress is happening—but unevenly.
Nigeria has since legalised digital assets. Kenya, Ghana, Rwanda, and Morocco are on the verge of passing draft regulations by the end of 2025.
Angola, however, has joined a group of nations imposing total crypto bans.
South Africa’s approach is different: it has no dedicated crypto legislation, but in October 2022, the Financial Sector Conduct Authority (FSCA) declared crypto assets a “digital representation of value”, paving the way for future regulation.
The FSCA has since announced plans to license crypto trading firms, aiming to prevent theft, money laundering, and destabilisation of monetary policy.
South Africa’s incremental but strategic approach could serve as a useful template for Uganda—especially given the cross-cutting impacts of crypto assets on financial institutions, regulators, consumers, and enforcement bodies.
Cautionary tales
Then there’s the Central African Republic (CAR), which in April 2022 became the first African country to declare Bitcoin and other cryptocurrencies as legal tender.
But what looked like a landmark moment for digital finance quickly became a diplomatic and legal standoff.
CAR’s unilateral move placed it at odds with the Bank of Central African States (BEAC)—which governs monetary policy for six member countries in the Central African Economic and Monetary Community (CEMAC).
Though BEAC had issued a legal framework for electronic money back in 2011, it had explicitly banned cryptocurrency use for financial transactions.
CAR’s new statute directly violated the CEMAC treaty. In response, the CAR parliament repealed the law in March 2023, effectively stripping cryptocurrencies of their legal tender status and bringing the country back in line with its regional obligations.
The CAR experience is a cautionary tale: rushing to regulate without regional alignment invites con-flict and instability. For Uganda—an integral member of the East African Community (EAC)—the lessons are especially pertinent.
The EAC envisions financial integration via a common market, customs union, and eventually, a monetary union.
If Uganda is to introduce cryptocurrency regulations, it must do so in a way that does not undermine its EAC commitments.
As of now, most EAC member states have taken a common stance against digital currencies, which makes Uganda’s room for maneuver narrower.
IMF best practice
On February 8, 2023, the Executive Board of the International Monetary Fund (IMF) discussed a key board paper titled Elements of Effective Policies for Crypto Assets.
The document offers guidance to IMF member countries—including Uganda—on how to craft a comprehensive, consistent, and coordinated policy response to the rising influence of crypto assets.
The paper outlines nine core elements that form the foundation of an effective national crypto policy.
While these are still relatively new globally, there is no evidence yet that Uganda has begun applying them in any formal or legislative capacity.
These require a country to safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and avoiding the recognition of crypto assets as official currency or legal tender.
They then require a guard against excessive capital flow volatility, maintaining the effectiveness of capital flow management measures, and a government to analyze and disclose fiscal risks and adopt unambiguous tax treatment for crypto assets.
Then proceed and establish legal certainty for crypto assets and address related legal and contractual risks.
Plus it needs to develop and enforce prudential, conduct, and oversight requirements for all participants in the crypto market and establish coordinated monitoring frameworks across domestic agencies and develop international cooperation mechanisms to ensure effective supervision and enforcement.
But it is required to monitor the impact of crypto assets on the global monetary system, to better manage emerging risks whilst enhancing global cooperation for developing secure, interoperable digital infrastructures.
This is all aimed to promote alternative solutions for efficient and inclusive cross-border payments and finance.
Together, according to the IMF, these elements form a strategic policy architecture that any country—developed or emerging—can adopt to manage crypto adoption in a stable, secure, and innovation-friendly manner.
Organizations like CIPESA argue that these policy principles are particularly critical for African countries like Uganda.
In various research briefs, CIPESA notes that cryptocurrencies—despite their current legal grey area—facilitate digital trade, streamline cross-border transactions, bypass intermediaries, and improve financial inclusion.
Rather than rejecting crypto outright, the prudent course is regulatory curiosity: study the risks, understand the mechanics, and craft rules that mitigate harm while unlocking economic benefits.
“As such, Uganda should explore this measured and informed approach as well,” CIPESA states.
A bullish drive?
CIPESA argues that government agencies—such as Bank of Uganda, Ministry of Finance, Uganda Revenue Authority, and Financial Intelligence Authority—should unequivocally define the legal status of cryptocurrencies.
The current ambiguity under electronic transactions regulations, CIPESA notes, makes enforcement inconsistent and weakens oversight of crypto-related inflows and outflows across both business and personal accounts.
One key recommendation is the redesign of capital control frameworks to account for crypto-facilitated capital flows. Clear and structured regulation would also reduce uncertainty for private sector actors, encouraging their participation in the digital economy and improving investor confidence.
But CIPESA acknowledges a reality often overlooked in public debates: regulation will always lag behind the technical evolution of cryptocurrencies.
Because of this, Uganda should not go it alone. Instead, the country ought to work with regional and international partners to develop a shared cryptocurrency regulatory treaty—one that accounts for the specific needs of developing economies.
Such a treaty could include provisions for technology transfer, capacity development, and frameworks to tackle the legal complexities of cross-border crypto transactions, including money laundering and jurisdictional loopholes.
Beyond treaties, regional economic cooperation is critical.
Given the inherently borderless nature of crypto assets, Uganda and its EAC partner states would benefit from joint information-sharing frameworks covering crypto development, trading systems, and market behaviors.
Such collaboration would not only enhance enforcement and tax compliance but also build institutional capacity and limit evasion of capital controls.
On the regulatory side, CIPESA flags a critical grey area: the assumption that crypto assets—particularly security tokens—fall under the existing Capital Markets Authority Act.
This interpretation, though common, is far from settled. As such, CMA must develop clear guiding principles on the treatment and use of security tokens to address confusion, protect consumers, and close legal gaps that could expose investors to risk.
