Why Are Crypto Companies Abandoning Uganda?
News, Opinion, Regulation | November 25, 2020 br>
By: Giorgi Mikhelidze
Uganda is one of the few African nations where there is a crypto-friendly environment and today there are so many crypto companies in the Ugandan market. Until this time it was believed that the crypto landscape in Uganda was thriving but soon the situation may change as some major crypto companies started to leave the country. Recently one of the world’s largest crypto exchange n companies, Binance closed down two of its subsidiaries and one of them was the Ugandan branch.
According to CoinTelegraph, this action is a part of the new affiliate program that the company plans to launch in Africa and this was officially announced on November 3rd. The main purpose of this new program is to promote Binance across the whole African continent. The company gives influencers, content creators, or everybody who is enthusiastic about cryptos in some African countries to take part in the Binance Africa Affiliate Program. Nigeria, Ghana, South Africa, and Kenya are on the list of these countries, as well as, Uganda. The initiative is pretty favorable for people in Kenya as it offers them peer-to-peer services, while customers from Nigeria, South Africa, and Uganda are provided with fiat-on-ramp service.
Why do crypto-firms in Uganda tend to shut down?
The initiative to develop this affiliate program is a consequence of Binance’s recent announcement to close down its Uganda subsidiary. The branch will be shut down completely on November 28 while operations of trading services will stop for November 11.
However, Binance Uganda is not the only crypto company that abandoned the Ugandan market recently. As it seems nowadays there is a tendency of crypto companies to shut down completely or switch to different African countries and this tendency has certain reasons. Mainly it can be attributed to current issues like regulatory uncertainty, political disarray, and several other things but first of all, it’s interesting to note why these crypto companies entered Uganda in the first place.
Generally, cryptocurrency is the most common way of transacting money for foreign exchange traders. Cryptos give them lots of benefits and Uganda is known for having lots of forex traders. This is why the most common way locals were trying to make a living was to find out how to start forex trading in Uganda, which was quite tenuous and difficult given the regulatory issues. But crypto companies saw a large market of investors thirsting for options, so it was obvious they had to enter it. This is how the crypto landscape was formed in Uganda which had been operating for years but now things are a little bit complicated for the Ugandan market as they started to abandon the country.
Lack of regulation
The most obvious reason for the closure of Binance and other crypto firms in Uganda is uncertain regulations. Currently, cryptos are not legal in the country but also there nothing is said in the official law about the restriction as well. And that’s exactly the problem. People seem to be tired of waiting for the government to regulate the crypto landscape and they take part in the trading or other crypto-relating markets without their permission. As a result of the lack of regulation, there has been a lot of problems with cryptocurrency. For example, traders often experience various kinds of fraud, such as coin offerings or projects without any sufficient value.
But the government seems uncertain. They haven’t decided yet whether to legalize cryptos or not or in general, how to regulate the market, and as financial experts believe, it is a consequence of them having a little or absolutely no understanding of how cryptocurrencies work. Before now the central bank had been warning the customers to avoid using cryptocurrencies because of the related threats but now the government seems to have changed its opinion and even the prescient declared recently that it’s time to encourage the use of blockchain. But this statement followed cases of crypto companies abandoning Uganda. Certainly, shutting down leading businesses will harm the economics of the country and maybe that’s the reason why the government changed their politics all of a sudden.
Political disarray
Not having certain regulations is not the only reason why crypto companies tend to leave Uganda. Nowadays the political situation is also full of confusion in Uganda which plays an important role in this tendency. Political instability raised lots of issues in the country including inflation and currency volatility. As a result, crypto companies are not sure anymore whether it’s worth to work in the country or switch to a more reliable and sound place where their stability and growth will be guaranteed. However, there are lots of African nations that are considered politically stable which means that crypto companies may find more benefits if they close down their branches in Uganda and switch to more reliable places.
This is exactly the case with the closure of Binance Uganda. It was a fiat-to-crypto platform that had been operating since June 2018 by Binance. They aimed to allow their customers access to crypto and in general, encourage crypto adoption in Africa. Even though the Ugandan Branch already stopped operating, the customers can deposit Ugandan Shilling through Binance’s main platform.
It’s important to note that Binance Uganda is not the only branch of Binance that was shut down and the company also announced that soon it’s going to close the Jersey branch as well, however, they didn’t mention any specific reasons. Despite this, Binance still plans to continue expanding its branches globally.