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Uganda seeks to regulate digital assets in new bill

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Uganda is set to become one of the first countries in Africa to regulate digital assets with a new bill that seeks to bring the industry under the jurisdiction of the country’s capital markets watchdog.

The Capital Markets Authority Amendment Bill 2023 is spearheaded by Jinja Southeast legislator Nabeta Igeme, a member of the ruling National Resistance Movement.

The bill seeks to expand the registration power of the CMA, including giving it “power of registration of prospectuses for virtual and digital assets, tokenisation and regulatory sandboxes.”

It has received the support of many Ugandan digital asset industry stakeholders who believe it’s a “big step in the right direction.”

The Blockchain Association of Uganda says the bill will “unlock the potential of virtual assets and blockchain technology in mobilizing resources for the Ugandan economy.”

However, the CMA CEO Keith Kalyegira claims that the regulator is equipped to oversee the sector:

“For new securities [like digital assets], we can always prescribe using the current framework. It can be a fairly quick process.”

Kalyegira pointed out that most countries rely on existing regulations to oversee digital assets. This approach calls for inter-agency cooperation to regulate the sector depending on whether an asset is a security or a utility token. Additionally, most of the tokens Ugandans invest in are developed overseas, and the CMA can rely on regulatory guidance from their home countries.

“Are the traditional rules that govern the issuance, trading, custody, audit and taxation of securities different because they are virtual? Does the name digital make it necessary to create a different set of rules?”

While he’s not opposed to the new bill, Kalyegira says Uganda doesn’t need complex new rules for digital assets.

“These assets are essentially the same as traditional securities. They carry the same risks and regulators should rely on the same approach,” he said.

Uganda’s central bank issued a directive barring licensed entities from processing digital asset transactions last year. The country’s high court upheld the order this year, describing it as a valid attempt by the bank to deter “an undefined system as a payment instrument in Uganda.”

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