Uganda’s cryptocurrency market hits Shs4 trillion despite ban

Ugandans moved more than Shs4 trillion through cryptocurrency and other virtual asset platforms over a four-year period despite a government ban on crypto trading within the formal financial system, a new report by the Financial Intelligence Authority has revealed.

The figures are contained in Uganda’s first National Money Laundering and Terrorism Financing Risk Assessment on Virtual Assets released in September 2025.

According to the report, virtual asset inflows into Uganda between July 2020 and June 2024 totalled $564 million (about Shs2.12 trillion), while outflows stood at $546 million (about Shs2.05 trillion), creating a combined transaction volume of more than $1.1 billion (Shs4.13 trillion).

The findings highlight the rapid growth of a largely unregulated crypto economy operating outside Uganda’s formal banking and payments system.

The report indicates that Uganda ranked 34th globally out of 155 countries in virtual asset adoption in 2024 despite having no licensed cryptocurrency operators and a central bank directive barring supervised financial institutions from dealing in crypto-related transactions.

Most of the transactions involved stablecoins such as USDT and USDC, which accounted for more than $314 million in inflows, followed by Bitcoin at about $190 million.

Officials say the market has increasingly shifted away from regulated exchanges toward decentralised finance platforms, commonly known as DeFi.

Mr Denis Kizito, the Director of Market Supervision at the Capital Markets Authority, said Ugandans are increasingly using platforms with minimal regulatory oversight.

“Ugandans are shifting their activities from centralised platforms and exchanges towards the use of decentralised ones,” Mr Kizito said.

“This shows that Ugandans prefer to use less regulated platforms which have fewer oversight mechanisms and Know Your Client requirements,” he added.

The report estimates that 84.5 percent of Uganda’s virtual asset activity now flows through decentralised finance platforms, significantly above the global average of about 35 percent.

Authorities say this trend presents growing anti-money laundering and counter-terrorism financing risks because many transactions occur anonymously and outside traditional compliance systems.

Bank of Uganda in 2022 directed all supervised financial institutions, including banks, payment service providers, forex bureaux and mobile money operators, to avoid involvement in cryptocurrency transactions.

The directive reinforced an earlier 2019 position by the Ministry of Finance warning the public that virtual assets were not recognised as legal tender in Uganda.

However, the FIA report says the restrictions may have unintentionally pushed crypto activity deeper underground.

“By banning virtual asset transactions within the financial system, a shadow financial system has emerged,” the report notes.

Mr Kizito said the restrictions reduced risks within the formal banking sector but accelerated growth of unlicensed virtual asset service providers operating outside regulatory supervision.

“This has raised serious concerns about investor and consumer protection and Uganda’s international anti-money laundering and counter-terrorism financing reputation,” he said.

The report also highlights growing concerns about fraud and criminal abuse of virtual assets.

According to FIA findings, scam-linked transactions recorded $3.2 million in inflows and $5.8 million in outflows, patterns investigators say are consistent with Ponzi and pyramid schemes.

Authorities further disclosed that six counter-terrorism operations disrupted attempts by sympathisers linked to the Islamic State Central Africa Province to mobilise funds through virtual asset channels.

Uganda currently has no legal framework governing cryptocurrency trading, licensing, consumer protection or dispute resolution.

Mr Kizito warned that investors remain exposed because crypto assets are not legally recognised under Ugandan law.

“Since virtual assets have not yet been legally recognised in Uganda, investors lack legal protection if platforms fail or are hacked,” he said.

“There is no company currently licensed by government to sell or facilitate crypto trading, which increases the risk of dealing with fraudulent platforms,” he added.

The report comes at a time when several African countries, including Kenya, South Africa, Botswana and Nigeria, have moved to establish legal frameworks regulating digital assets and crypto service providers.

Officials say Uganda is still studying possible regulatory models as discussions continue among financial sector regulators, the Ministry of Finance and the Uganda Law Reform Commission.

The FIA report warns that failure to regulate the sector could expose Uganda to increased financial crime risks and damage the country’s anti-money laundering reputation internationally.