Cryptocurrency still Illegal in Uganda, legal tender in other African Countries.
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The Bank of Uganda blacklisted cryptocurrency and the government has been warning people about trading cryptocurrency for a while now. The Bank of Uganda has not licensed any institution to sell cryptocurrencies, and yet many huge companies still facilitate the trade in crypto-currencies in Uganda.
In 2019, Finance minister Matia Kasaija said : “The government of Uganda does not recognise cryptocurrency as the legal tender in Uganda and has not licensed any organisation in Uganda to sell cryptocurrencies or to facilitate trade in cryptocurrencies.”
What is Cryptocurrency?
Cryptocurrency is digital or virtual money that runs on the internet on a distributed or decentralized network called the blockchain. Decentralized means there is no bank, board of governors or committee that regulates this type of currency or network. No one can control what happens in the cryptocurrency world.
I guess that’s why some governments and financial institutions hate it.
The distributed network (Blockchain) is run by various machines owned by different people around the world. That’s what’s meant by decentralized. As for the virtual currency, you can’t touch it, but has value that allows you to exchange it and trade it for other digital assets, goods, or even physical assets.
Can the government stop this?
Not necessarily, But the government has the power to stop you from transacting in Bitcoin (one of the top cryptocurrencies), or Ethereum or any other digital currency that you might already own.
What they can’t afford to do, however, is stop you from owning it. That is because, as long as you have the internet, you can create a crypto wallet and start trading crypto. It’s as simple as that. You don’t have to wait for someone to approve your application or account registration.
What is a Crypto Wallet?
Crypto wallets allow you to store and access your digital assets and cryptocurrencies on the blockchain network. These wallets are like your personal bank. They are responsible for securing your login keys (private and public keys), as well as validating any transactions when purchasing bitcoin or any other supported digital currency, coin or token.
It is important to note, however, that unlike a normal wallet, which can hold actual cash, crypto wallets technically don’t store your crypto. Your holdings live on the blockchain network. Your crypto wallets only store the keys that allow you to access your crypto assets on the blockchain.
Tip: Digital Assets can be anything from game assets like weapons, avatars, tokens, virtual land, and virtual currency or coins.
What is Blockchain?
Did I mention a crypto wallet is like the public bank where everyone is allowed to store their assets? The blockchain is the book that records all the digital assets that are stored one block after the other. What makes the blockchain special is that it’s immutable, everyone can write on this network or ledger book, but no one can erase data from it.
The blocks of data are chained one after the other, forming the blockchain, and it’s impossible to insert a block in between already recorded blocks. They are encrypted using an algorithm.
Other Features of the Blockchain you need to understand include:
- Proof of Work — Remember the blockchain is run by different computers around the world. When someone makes a transaction, these computers are responsible for validating transactions by solving complex mathematical puzzles. Whoever owns the computer that solves this puzzle wins a reward. Which brings us to the other Blockchain feature.
- Mining — Mining is the process of validating transactions on the Blockchain. Miners use their resources (time, money, electricity, etc.) to validate a new transaction and record them on the public ledger (Blockchain), as a result they are rewarded from the fees people are charged for these transactions.
- Proof of Stake — In 2018, the Ethereum creators started moving from proof of work consensus to proof of stake. Proof of Work uses a lot of energy and electricity costs are very high during the mining process. Proof of stake utilizes what we call staking, where by anyone owning some Ethereum can keep it on the network to facilitate the transactions in exchange for a percentage of the fees on the network.
How does the Blockchain Work?
Once a block is recorded, the Blockchain verifies transactions and your crypto asset ownership by the help of a public key or address (username), and the private key (PIN number) or seed phrase stored on your wallet. Different computers on the distributed network are first contacted to make sure you actually own the asset.
Besides the main blockchain that was created with the birth of Bitcoin in 2009, other blockchain networks have been created including the Ethereum Network, Binance Smartchain by Binance, Solana Blockchain for faster and lower transaction fees, Polygon, among others.
What are Smart Contracts and Decentralized Apps (DApps)?
The Ethereum blockchain (not to be confused with ETH - Ethereum cryptocurrency), allows for applications to be written and run via smart contracts developed in Solidity programming language (Learn Solidity). Smart contracts are the DApps or Decentralized Apps that you might have heard of. Decentralized Apps run on blockchain, which means once launched it cannot be changed.
What is a Bitcoin Wallet?
You might have been wondering, how does a Bitcoin wallet work? This is how, When you create a Bitcoin wallet, a user name or public key also know as an address is created for you and Only Bitcoin can be sent to that wallet. These keys allow you to access your Bitcoin on the Blockchain. The two keys have to be secured, especially the private key also known as the seed phrase, if you lose the seed phrase, you lose all your money.
Some wallets support more than one asset. In fact, most crypto wallets support more than one digital currency or asset.
Now that you know about Blockchain, crypto wallets and cryptocurrency, let’s look at the various wallets you can use to store your crypto or digital assets.
Types of Cryptocurrency Wallets
A wallet simply stores your private and public key in addition to helping you process and validate purchases or transactions. Crypto wallets also allow you to browse and use DeFi (Decentralized Finance) applications, and Decentralized Apps as most have built in web3 browsers.
Decentralized Finance allows you to use bank features like saving, borrowing and lending using a Decentralized App (DApps) build with smart contracts.
Most blockchain wallets come with Web3 browsers that allow you view and interact with Web3 Apps in addition to accessing your digital currency and assets like game models for Play to Earn blockchain games like the Sandbox, Axie Infinity, Decentraland, among others.
What is Play to Earn (P2E)?
Besides storing tokens, and coins, these wallets can also store NFTs (Non-fungible tokens). NFTs are a way to verify ownership of digital assets on blockchain. In fact, game assets like the ones used in Axie Infinity, Decentraland, The Sandbox game maker, crypto kitties, TFC (The Football Club), and many more Play-to-Earn (P2E) games, are represented by NFTs (Avatars, weapons, among other game assets).
When a game is a P2E (Play-to-Earn games), it means you are rewarded for your participation with tokens, digital cash or non-fungible tokens. These games use the blockchain technology of cryptocurrencies to allow people to receive payments automatically from their gameplay progress.
Most of the Play-to-earn games (P2E) have gone mainstream, becoming a core component of nearly every Metaverse out there, some popular P2E games include The Sandbox, Decentraland, Axie Infinity among others.
Let’s get back to crypto wallets, since you need a wallet for every P2E game for you payment and NFT rewards or gifts you win.
There are Two main types of wallets: Cold wallets and Hot Wallets.
Cold Wallets can store your crypto keys offline which means less risk of hacking, while Hot wallets can only be accessed online to help facilitates cryptocurrency transactions. Crypto wallets simply store your private and public keys that give you access to your digital assets.
Remember the private key that is created when you create a wallet, you can write you private key on a paper and that paper will become your Paper wallet. You have to secure this paper as if you were securing your wealth.
Online Wallets: (Hot Wallets)
These are Browser or software wallets that can be used in browsers by the aid of a browser extension, downloaded on computer or as a mobile app.
Watch this video to learn how to install a browser extension wallet.
Best Online Wallets Include;
- Coinbase Wallet— this is different from the Coinbase app accessed via the main website that allows you to buy and sell crypto or exchange it for fiat currency and transfer it to a bank account.
- Binance — This wallet allows you to buy, trade, and hold 600+ cryptocurrencies as well as store Fiat currency that you can use later to convert to crypto. Binance started out as an exchange just like Coinbase. Now Binance has their own blockchain (Binance Smartchain) along with their own coin which started as a token, Binance Coin (BNB) which has emerged as one of the leading digital assets in the crypto markets.
- MetaMask — MetaMask is a software cryptocurrency wallet used to interact with the Ethereum blockchain. It allows users to access their Ethereum wallet through a browser extension or mobile app, which can then be used to interact with decentralized applications and Metaverse.
- Blockchain —One of the most trusted crypto wallets with over 82 million wallets since 2011 and over $1 Trillion in crypto transactions in over 200 plus countries. Blockchain, the creators of the Blockchain wallet, began as the first Bitcoin blockchain explorer in 2011.
- Trust Wallet — Like the name suggests, Trust wallet is one of the most trusted & secure crypto wallets. You can use it to access (Decentralized Apps) DApps, buy, store, collect NFTs, exchange & earn crypto.
These are devices that store and allow you to access your crypto assets. Most of them look like a flash drive or hard disk. The most common hardware wallet is called Ledger Nano. Hardware wallets are probably the most secure and most expensive digital wallets.
Best Hardware Wallets include:
Ledger Nano — Ledger’s one of the smartest ways to secure, buy, exchange
and grow your crypto assets. See the new Ledger Nano Plus.
Trezor — it’s an advanced cryptocurrency hardware wallet by Satoshi Labs that allows you to store more than 100 crypto assets, tokens, coins, passwords, other keys with minimal risk.
Pro Tip: Always write down your private key and keep it somewhere safe. Remember if you lose your private key, you lose your money.
So, you see, cryptocurrency is not hard to understand. Even though many people make it feel like rocket science.
Uganda has been a home of many cryptocurrency companies despite the continued warnings on trading cryptocurrency. While other African countries like Central African Republic among others, have adopted cryptocurrency as a legal tender. It is estimated that over 4.5 million people, 8.5% of Kenya’s total population, currently own cryptocurrency.
How to Withdraw from your Crypto Wallet.
It’s not as easy to just convert Bitcoin to cash directly whenever you feel like it, but you can sell your Bitcoin or Ethereum in exchange for the fiat currency on exchanges like Coinbase, Binance, Blockchain, among others.
What is a Cryptocurrency Exchange?
A crypto exchange stores crypto and handles transactions (anonymously on the blockchain) on your behalf. Exchanges help you find a buyer so that you can quickly convert the value of your Bitcoin into the cash you need.
Other exchanges like Coinbase have a crypto reserve that allows them to sell you the fiat currency in exchange for your crypto. They send this fiat direct to the bank of your choice, you can also withdraw to mobile money for example using Binance and Flutterwave, Chippercash, Yellowcard, among others.
3 Ways to Buy Cryptocurrency and other Digital Assets
- Use Fiat and Mobile Money — Binance, among others, have something called P2P (Peer to Peer) system that allows you to buy and sell crypto directly to people around your area.
- Buy direct from a friend— If you own some Ethereum and you want some cash to spend in your local store that doesn’t accept cryptocurrency as a form of payment. For example, in Uganda where cryptocurrency is not a legal tender, we can agree and accept to exchange with each other. This is what is meant by Peer to Peer (P2P). I send you Fiat and you send me the Ethereum or bitcoin. It works with PayPal, Mobile Money, Cryptowallets.
- Use an Exchange — As mentioned earlier, you can buy crypto from an exchange using credit/debit card on Coinbase, Binance, Blockchain, among other exchanges.
Is the Government right to Blacklist cryptocurrencies in Uganda?
That remains the question. However, to answer this, I think we need to look at what the intentions of the Government is, I think the government is trying to protect it’s citizens. That’s all. Many people have been victims of cyber scams due to not understanding cryptocurrency and how it works.
Why did the Bank of Uganda Blacklist cryptocurrencies in Uganda?
The number one reason the government is not okay with cryptocurrencies in Uganda is because they are still looking for a way to regulate it.
Again, For your own good.
You see, the thing is that financial institutions including Credit Institutions, Micro Finance Deposit-Taking Institutions (MDIs), Forex Bureaux, and Banks in Uganda like Standard Chartered, Crane Bank, Stanbic Bank, ABSA Bank, UBA Bank, among others, are regulated by Bank of Uganda just like Televisions like NBS, or Bukedde TV are regulated by UCC (Uganda Communications Commission). Which means that if the bank lost your money or something unfortunate happened to your savings, there might be a way to get them back.
Unlike holders of cryptocurrencies in Uganda, or any other country, there is no consumer protection should you lose the value assigned to your cryptocurrency holdings.
But you already knew that from the beginning of this article, anyway.
I only hope that the government keeps educating Ugandans about cryptocurrency and by the time they find a way to regulate it, at least people will know what they are getting into.
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