2. PRESENTATION OUTLINE
2
• INTRODUCTION
• EVOLUTION OF CURRENCY
• PROS AND CONS FOR CRYPTO-CURRENCY
• TRANSACTION PROCESS
• WHY GOVERNMENTS ARE NOT EMBRACING
• CASE OF CRYPTO-CURRENCY IN UGANDA
• RECOMMENDATION/WAY FORWARD
3. Crypto currency is a digital currency in which encryption
techniques are used to regulate the generation of units of currency
and verify the transfer of funds.
Decentralized i.e. operates independent of the Central authority
The supply of money is regulated by software and the agreement
of users of the system
Trust is based on peer to peer consensus
Transactions are irreversible
3
INTRODUCTION
4. 4
Parameter Fiat or conventional
currency
Crypto currency
Type Real Virtual
Intermediates Yes No (peer- to- peer)
Acceptance National (legal) NA but (International
through internet)
Introduction Cont’d…………
Conventional currency Vs. Crypto currency
5. 5
Parameter Fiat or conventional
currency
Crypto currency
Secure (can not be
counterfeit)
Moderate High
Supply Max supply limit has no max supply
limit
Sovereign
(government issued)
Yes No
Authority Centralized Decentralized
Introduction Cont’d…………
Conventional currency Vs. Crypto currency
6. 6
2009 marked a defining moment for peer-
to-peer electronic cash system when an
individual (or group) under the
pseudonym Satoshi Nakamoto publicly
released the bitcoin software. Bitcoin was
created to protect against inflation,
provide security, and put the control of
money in the hands of the people
Evolution of currency
7. 7
1998 – 2009 The pre-Bitcoin years
Attempts at creating online currencies with ledgers secured by
encryption. Examples of these were B-Money and Bit Gold, which
were formulated but never fully developed.
2008 – The Mysterious Mr Nakamoto
Bitcoin paper – A Peer to Peer Electronic Cash System was posted
on cryptography. posted by someone calling themselves Satoshi
Nakamoto, whose real identity remains a mystery to this day.
8. 8
2009 – Bitcoin begins
• Bitcoin software is made available to the public for the first time and
“mining” – the process through which new Bitcoins are created and
transactions are recorded and verified on the blockchain – begins.
2010 – Bitcoin is valued for the first time
• As it had never been traded, only mined, it was impossible to assign a
monetary value to the units of the emerging cryptocurrency. In 2010,
someone decided to sell theirs for the first time – swapping 10,000 of
them for two pizzas. If the buyer had hung onto those Bitcoins, at
today’s prices they would be worth more than $100 million.
9. 9
2011 – Rival cryptocurrencies emerge
• As Bitcoin increases in popularity and the idea of decentralized and
encrypted currencies catch on, the first alternative cryptocurrencies
appear,known as Altcoin Currently there are over 1,800 cryptocurrencies
in circulation with new ones frequently appearing.
2017 – Value of one Bitcoin reaches $10,000 and continues to
grow
The 2018 cryptocurrency crash
Between January and September 2018 the value fell by up to 80%. As
of August 2019, the value of Bitcoin is about USD 12,000
10. HOW CRYPTO CURRENCY OPERATES
10
The system works as a creation of a
payment system, which is guaranteed by
the creating company and is independent
of any control or validations except by
that cryptocurrency system that was
created. For example, the first and
biggest cryptocurrency system was
Bitcoin founded in 2009, but after that,
over 1,800 other systems have been
created.
12. Pros
12
Reliable technology:
• Cryptocurrency is built on top of reliable technology called block-chain, which
records all transactions and apparently cannot be altered or tampered with.
Decentralized:
• Cryptocurrency is suitable for those who do not want a currency to be centralised
or controlled. The key characteristics of Cryptocurrency include: no central
authority for control; the network is distributed to all participants.
Easy to Use:
• Cryptocurrencies are easy to use because, unlike processes of opening bank
accounts, verification, and Know Your customer (KYC) policies in banks, one
would just need a device that can access the internet, to create an e-wallet which
can be used wherever and whenever needed.
13. 13
Used Internationally:
• Cryptocurrency is apparently limitless in terms of usage and can be used by
anyone anywhere in the world without any difficulty
Fast Transactions:
• With crypto-currency, you don’t need to wait for days to receive money.
Cryptocurrencies are based on the block-chain technology which removes delays,
payment of fees, and other third-party approval that may be present with the
current conventional fiat system.
Transparency of transactions:
• Every transaction is recorded on the block-chain that keeps
information about everything and the information is publicly
known to members of that p2p network.
Pros Cont’d
14. 14
Anonymity:
• One is able to create an infinite number of e-wallets without
reference to the name, address or any other information, and it
is very hard to trace the creator of these currencies.
Pros Cont’d
15. 15
CONS
Need of users to have extra IT Knowledge:
• cryptocurrency is entirely digital and all transactions are executed digitally
Volatility
• Cryptocurrency is highly susceptible to volatility and is still being developed
with the oldest cryptocurrency (Bitcoin) having been in existence for just 10
years
Large Risks of Investing in Crypto-currency
• Since its is privately created currency, it is prone to losses in case of
fraudsters. Eg Kenyan lost Millions when the creator of the cryptocurrency
disappeared and the websites were no longer accessible. This has happened in
many countries like Malaysia, Czech, Bulgaria etc.
16. 16
Can easily be used for illegal activities
Their very nature as discreet and uncontrolled activities that make
them prone to illegal use, funding of terrorism, money laundering,
arms trading and other possible illicit financial activities.
Not Accepted Widely:
• At the moment, cryptocurrencies are not acceptable in most
countries. Some have had explicit complete bans, while others
have implicit bans on cryptocurrency.
CONS Cont’d
17. Cons Cont’d
Not reversible Payment
• Crypto currency system works in such a way that once an
entry is made, it is imprinted in stone. It cannot be reversed
in anyway, unless by requesting the receiver to make a
transaction to refund. In case an error is made during a
transaction.
17
18. 18
Why Gov’ts are not embracing the Innovation
Need to control fiat currencies:
• Government through its Central Bank needs to have control over
the issuance, circulation and destroying of its currency using
monetary policy so as to exert desired economic influence.
Illegal activity:
• A 2018 study from the University of Technology Sydney found that
about one quarter (25%) of bitcoin users, and nearly half of all
bitcoin transactions, are involved in illicit activity.
Nature of the key issue at hand:
• Facebook announced plans to launch its own Libra, targeting 2.4
billion users of Facebook and WhatsApp. This is almost a quarter
of the world population not near the number of bank users
worldwide.
19. 19
What's Happening elsewhere
• Japan is one of the countries trying to find ways of embracing
cryptocurrency and regulating it. As governments around the world try to
figure out how to deal with cryptocurrency, Japan has been dealing with it.
Bitcoin has been a legal form of payment in Japan since 2017 when
licenses for exchanges were issued.
• India has proposed a total ban on cryptocurrency, the Indian government is
proposing a Bill entitled the Banning of Cryptocurrency and Regulation of
Official Digital Currency Bill 2019, underwhich holding, selling or
dealing in cryptocurrencies such as Bitcoin could soon be illegal.
• Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal Pakistan, United Arab
Emirates and Vietnam have come up with absolute bans on crypto
currency.
• Bahrain, Bangladesh, Colombia, Dominican Republic, Indonesia, Iran,
Kuwait, Lesotho, Macau, Oman, Qatar, Saudi Arabia, and Thailand are
some of the countries that have not directly banned cryptocurrency, but do
not fully allow them.
20. 20
Case for Uganda
Uganda has not explicitly banned, proposed regulation or
attempted to control cryptocurrency. There is still a major need to
study, analyse and evaluate the short-term and long-term
approach to cryptocurrency.
In February 2017, the Bank of Uganda issued a warning against
the use of cryptocurrencies in general and the services of an
unlicensed entity called One Coin Digital Money, due to the
absence of investor protection schemes and relevant regulatory
mechanisms.
The warning was to encourage the Public to do business
transactions with only legal and licensed Financial Institutions.
21. 21
Recommendations
• Cryptocurrencies can be suitable medium of exchange, store of value,
and unit of account. Possessing these characteristics makes them a
reliable form of money by any yardstick. However, some obstacles must
be overcome before the general public widely adopts these online-based
currencies.
• Uganda should take a position of not expressly recognising
cryptocurrency as a medium of exchange but should take adequate
measures to warn the public about its use due to the susceptibility of the
population to internet and other IT scams since the population needs
adequate protection, considering past experiences with pyramid schemes
and other online trading sites that have cheated Ugandans.
22. 22
Recommendations Cont’d
• Government needs to formulate a dedicated Policy and Law to
address the disruptions caused by the advent of Digital Financial
Technologies and Services.
