Cryptocurrencies illegal in Uganda – High Court Judge Rules

On 24 April 2023, a landmark ruling was delivered by Hon. Justice Ssekaana Musa, a High Court Judge in Uganda, which declared cryptocurrencies illegal in the country. This ruling has far-reaching implications for the use of cryptocurrencies in Uganda, as it implies that they cannot be used as a legal means of payment.

For those seeking a comprehensive understanding of the events leading to this groundbreaking ruling, I present below my Case Summary for the said ruling i.e. the ruling in Silver Kayondo v. Bank of Uganda: 

Brief facts

On 29 April 2022, the Bank of Uganda (BOU) issued a Circular reference number NPSD 306 barring all entities licensed under the National Payment Systems Act 2020 from liquidating crypto assets i.e. converting crypto assets/currencies to Mobile Money or Airtel Money.

Mr. Silver Kayondo, an advocate of the High Court of Uganda and a peer-to-peer retail investor in crypto and other digital assets, lodged an application for judicial review at the High Court of Uganda – Civil Division against BOU vide Miscellaneous Cause No. 109 of 2022, challenging BOU’s actions of issuing the said circular. Mr. Kayondo argued that crypto assets were outside the regulatory purview of BOU since there is no law expressly banning them and as such, BOU’s Circular directing licensees to desist from liquidating crypto assets was illegal, irrational and arrived at with procedural impropriety.

Main Issue

Three issues were framed for determination but the main issue was: - Whether BOU’s Circular issued on 29 April 2022 was tainted with illegality, irrationality, and procedural impropriety.

Decision

On whether the Circular was tainted with illegality and irrationality

Ruled: The Circular was not tainted with illegality and neither was it irrational.

Judge's Reasoning:

• The fact that cryptocurrencies are unregulated under Uganda’s legal regime does not mean that Ugandans can operate without sanction or contrary to the present and existing currency system; as the BOU is mandated under Article 162 of the Constitution and Sections 4, 19 and 20 of the National Payment Systems Act 2020 to ensure economic stability in Uganda through regulation of the currency systems and payment systems.

• Much as cryptocurrencies are digital assets, they are illegal under the current National Payment System because they are not recognized as legal tender/currency by the BOU and as such, they are not accepted as a general payment instrument in Uganda.

On whether there was procedural impropriety in the issuance of the Circular

Ruled: There was no procedural impropriety.

Judge's Reasoning:

• It was not mandatory for BOU to conduct stakeholder consultations before issuing the Circular that banned crypto assets. This is because Section 4(4) of the National Payment Systems Act 2020 leaves BOU with the discretion on when to conduct stakeholder consultations in the exercise of its functions.

• Since Uganda’s legal system does not recognize cryptocurrencies, there was no need for BOU to conduct consultations with stakeholders as they too are unrecognized by the legal system and therefore, they (stakeholders in crypto currency systems) cannot demand to be heard before a directive or a guideline is issued by the BOU.

In conclusion, in light of the above-mentioned ruling, individuals and entities operating in the cryptocurrency sphere in Uganda should seek legal advice and stay informed about any updates or changes in the regulatory landscape to ensure compliance with the law and to navigate the crypto market within the bounds of the current legal framework. 

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