NAIROBI, Kenya- As the digital asset revolution accelerates across Africa, Uganda stands at a crossroads. While interest in cryptocurrencies continues to grow among Ugandan investors and entrepreneurs, the country’s regulatory stance remains ambiguous and, at times, prohibitive.
Meanwhile, neighbouring Kenya is forging ahead with a comprehensive legal framework for virtual assets, aiming to balance innovation with consumer protection and financial stability. The question now facing policymakers in Kampala is whether Uganda should follow Kenya’s lead, or risk falling behind in the region’s evolving digital economy.
Cryptocurrencies are not recognized as legal tender in Uganda, and the regulatory environment is marked by caution and uncertainty. The Bank of Uganda (BoU) has repeatedly warned the public about the risks associated with digital assets, emphasizing that no company or individual is licensed to offer cryptocurrency services in the country.
In a 2023 landmark ruling, High Court Judge Ssekaana Musa declared cryptocurrencies illegal under the current legal regime, stating that unless the BoU recognizes them as legal tender, they cannot be accepted as a means of payment. This decision reinforced the BoU’s earlier directives, which barred entities licensed under the National Payment Systems Act 2020 from converting crypto assets to or from mobile money, a popular transaction method in Uganda.
A high court decision in 2023 excluded cryptocurrencies from the National Payments Systems Act, with the Bank of Uganda issuing a circular warning that it is illegal to convert cryptocurrencies into mobile money and vice versa. It also warned entities licensed under the National Payment Systems Act to desist from facilitating cryptocurrency transactions. “There is also a private member bill where the Ugandan Capital Markets Authority is seeking to regulate crypto assets as virtual assets, so we are engaging with the authorities to make sure we adopt global best practices when it comes to cryptocurrencies,” says says Kenneth Muhangi, partner at KTA Advocates, also a member of Alliott Global Alliance.
Despite these restrictions, crypto trading is not explicitly banned. Peer-to-peer exchanges and informal trading continue, with Ugandans able to buy and sell cryptocurrencies using local payment methods such as mobile money and bank transfers.
However, the lack of clear legal recognition means that holders of digital assets are not protected by consumer safeguards, and the government does not regulate or supervise crypto exchanges or wallet providers.
In contrast, Kenya is moving decisively to regulate the burgeoning crypto sector. The Virtual Asset Service Providers (VASP) Bill, 2025, currently before Parliament, is set to provide the country’s first comprehensive legal framework for digital assets.
The bill, developed by the National Treasury, Capital Markets Authority (CMA), and Central Bank of Kenya (CBK), aims to combat money laundering and terrorism financing risks, establish a licensing and supervisory regime for virtual asset service providers, and foster innovation while protecting consumers.
Kenya’s proposed law comes amid rapid adoption of virtual assets. Kenya currently ranks third in Africa for crypto adoption, according to Chainalysis. .
Lawmakers have been engaging with industry experts and conducting live blockchain transactions to better understand the technology and its regulatory challenges. “This is a new frontier. Kenya is already third in Africa in virtual asset adoption. We must protect consumers and investors with proper legislation,” said Julius Ruto, a member of Parliament’s Finance and National Planning Committee.
The VASP Bill also introduces a 3% tax on the income earned from the transfer or exchange of digital assets, a move that has already been mirrored by Tanzania. This tax regime is unique globally and is intended to boost government revenue while bringing the crypto sector into the formal economy.
Allan Kakai, Legal Chief at Steakhouse Financial and Director at the Kenya Virtual Assets Chamber of Commerce, sees the legislation as a model for the continent. “This legislation is not Kenyan alone. It is a pan African legislation to guide a lot of standards of what crypto dealings will look like across a lot of African countries. It’s just about getting it fine-tuned so that it makes sense and enables innovation and growth within Kenya and abroad,” Kakai said.
Uganda’s current approach, characterized by warnings, prohibitions, and legal ambiguity, risks stifling innovation and leaving investors exposed to scams and losses. Without a clear regulatory framework, Ugandan consumers lack legal recourse if their crypto holdings are lost or stolen, and legitimate businesses face uncertainty and potential sanctions.
Larry Cooke, Legal Counsel at Binance Africa, underscores the importance of regulatory clarity for the region: “Kenya now sits on the brink of it, of having that opportunity to create that concept in legislation so that the rest of the Eastern Africa region can say, let’s move with this. You need a good standing with the regulators in Uganda. If there are additional tests that we need to do from a local perspective, we’ll do them to be compliant. You have to find a solution that works in this jurisdiction.”
The Ugandan government is mulling regulating the crypto industry but it’s not clear when and how. In January this year, Uganda’s State Minister for Planning, Amos Lugoloobi, revealed that over Sh2.5 trillion ($700 million) in crypto transactions occurred in Uganda, highlighting a rapidly growing but unregulated market. “Using bitcoin, a lot of transactions are happening and these transactions are not being managed anywhere because they are not regulated,” he said. “I was surprised to see that even in Uganda there are a number of operators. Just from a few that were reported from one of the member countries because we are members of that global network.”
While Uganda’s authorities have cited concerns over fraud, volatility, and financial crime, the growing popularity of digital assets and the emergence of regional regulatory models may prompt a rethink. There are signs of movement: the Capital Markets Authority is reportedly considering a private member’s bill to regulate crypto assets as virtual assets, and industry stakeholders are advocating for the adoption of global best practices.
For now, however, Uganda’s crypto sector remains in a legal limbo, with traders and investors advised to “stay informed about potential regulatory changes and consult local experts for updates.”
If Uganda is to borrow a leaf from Kenya, it will need to move beyond warnings and prohibitions and embrace a proactive, balanced approach to crypto regulation—one that recognizes both the risks and the transformative potential of digital assets in East Africa’s future.
