ppt crypto (DEA).ppt
- 1. 1 STATUS OF CRYPTOCURRENCY IN UGANDA Presentation to Directorate of Economic Affairs Financial Services Department
- 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.
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- 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.
- 23. Thank you