It has become an economic fact that, short of a global ban, which is unlikely, the cryptocurrencies are here to stay. Thus, financial experts, local and foreign, keep cautioning that their volatility means people should not invest more than they can afford to lose. The risks may not be overemphasised. But the mere hint of winning it big makes it seem worthwhile for many speculators to ignore the perils. The allure of possible riches is simply too irresistible. Since Bitcoin made its debut, riding on the 2008 global financial crisis, there are now too numerous versions of copy-cat cryptocurrencies emerging every now and then for one to keep count. CoinMarketCap, for instance, one of the better-known trackers of the digital currencies’ trends, lists over 1800 active cryptocurrencies on its website (https://coinmarketcap.com/all/views/all/). However, marked by a sustained downward trend, all has not been well with the currencies lately, and of which bitcoin best illustrates the sector’s health. Since the beginning of the year when it was going for around US$20,000 per coin, it was trading at just over $6,000 by mid this week. Ethereum, also among the most popular, was going at around $260. Tales of woe by investors detailing personal losses pepper web community forums such as one will find on Reddit affirm the downward spiral, giving it a more direct and relatable human experience. One such investor recalled how he got caught up when bitcoin was at its height in January. “[I] put around 25,000 USD in in total, spread out pretty well I thought,” he wrote in the Reddit cryptocurrency forum. “I was never really worried during that past dips as I had a lot of faith in the future of crypto’s and the technology... But the dips kept coming... My portfolio of 25k is now barely worth 5k, and not even worth selling. At this point I’d much rather consider it all lost.” Including such tales of loss, of which there also has been a number of mega-wins, it is part of cryptocurrency lore now that the developers of bitcoin viewed it as the currency of the future. One of its major attributes was that it would bypass banks and government regulation, as well as offer a way to conduct anonymous financial transactions more cheaply. But, as we now know, the anonymity of the virtual currency and lack of oversight as governments try to come to grips with the newness of digital currencies, it has had the unintended effect offering a safe haven for money laundering, terrorist financing, tax evasion and fraud. This has added to the urgency for regulation, a fact now recognised globally with the realisation that banning cryptocurrencies is neither feasible nor necessary as the world begins to understand and utilise the blockchain technology that underlies it. To paraphrase a previous argument I made in another platform, the existence of a vibrant virtual currencies market in East Africa, especially in Uganda and Kenya, not only marks the deep entrenchment of the blockchain technology and its derivatives in the region, but also the pull of investors already flocking in to exploit the opportunity. As long as the trade continues to be allowed, it is not enough to offer caution on the virtual currencies. It calls for a more proactive policy. Even as we should expect there are ongoing efforts to institute such a policy, the East African Community could borrow from two successive “Roundtable Discussions on Cryptocurrency and Blockchain Regulation in Uganda” held in the Kampala in 2016 and 2017. The discussions, whose report for the second roundtable was released in April this year, are under the aegis of the United Nations African Institute for the Prevention of Crime and the Treatment of Offenders (UNAFRI)in conjunction with the University of Birmingham’s Law School. One of UNAFRI’s mandates is to offer technical assistance to African States in the development of policy and of legislation on the regulation of disruptive technology. In one of its observations, the roundtable appears hesitant suggesting that blockchain technology ought not to be regulated, pending a wider benefit-risk analysis. It, however, notes recommendations of the 2016 Commonwealth Working Group on Virtual Currencies. These include a determination on the legality of virtual currencies, awareness-raising about virtual currencies including the risks, the adaptation of existing legal frameworks or enactment of new laws on the use of virtual currencies, capacity building and the creation of conducive environments for the development of virtual currencies. This amounts to endorsing the inevitability of the digital currencies. Thus, as long as they are in the market, it makes little difference the cryptocurrencies are not legal tender, or whether they can be defined as assets or commodities to be traded like shares at the stock exchange, financial markets authorities in the EAC as a bloc and within the countries have little choice but to ensure regulations to oversee the technology and safeguard consumers’ and traders’ rights, alike. Twitter: @gituram The views expressed in this article are of the author.
