Posted on Leave a comment

Economist Steve Hanke Warns Salvadoran Bitcoin Adoption Could ‘Completely Collapse the Economy’

The professor of applied economics at Johns Hopkins University, Steve Hanke, has recently been criticizing bitcoin adoption taking place in El Salvador. Hanke doesn’t think it’s a good idea for the Latin American country to use bitcoin as legal tender and says it could “completely collapse the economy.”

Steve Hanke Wants Countries to Adopt Currency Boards Instead of Gravitating Toward Bitcoin Adoption

The American economist Steve Hanke knows a lot about currencies, as he is the Cato Institute’s senior fellow and director of the Troubled Currencies Project. Hanke also was the senior economist during the Reagan administration from 1981 to 1982. The economist is critical of central banking and noted in 2018 that the world could use less of them. At the time, Hanke highlighted ten countries that are suffering from hyperinflation and the economist proposed that the countries either adopt the U.S. dollar or create a currency board.

“Countries that employed currency boards have delivered lower inflation rates, smaller fiscal deficits, lower debt levels relative to the gross domestic product, fewer banking crises, and higher real growth rates than comparable countries that have employed central banks,” Hanke said at the time.

Fast forward to three years later, Hanke is now discussing bitcoin (BTC) and the implications of widespread adoption. Hanke is not a fan of bitcoin and has mentioned this fact on numerous occasions. This past April, Hanke tweeted: “Bitcoin bulls hate to discuss the flaws of bitcoin. Cryptocurrencies are the future of money. Bitcoin is not.” The economist also shared an article he wrote, which stresses the use of currency boards over bitcoin.

In the article, Hanke talks about the monetary luminary Milton Friedman and Hanke also said he believes bitcoin comes with a “fundamental value of zero.” Hanke is once again attacking bitcoin after finding out that El Salvador would be leveraging bitcoin as legal tender in the Latin American country. Hanke thinks that nations like China or Russia could use El Salvador to cash out and remove USD from the equation.

“It has the potential to completely collapse the economy because all the dollars in El Salvador could be vacuumed up, and there’d be no money in the country. They don’t have a domestic currency. You’re not going to pay for your taxi ride with a Bitcoin. It’s ridiculous […] You’ve got 70% of the people in El Salvador don’t even have bank accounts, Hanke stressed during an interview with Kitco’s David Lin. Hanke continued:

The big problem with cryptos, in general, is that you can’t convert them into actual real legal tender that’s usable cheaply, and quickly. You can’t Bitcoin, for example, cheaply and easily convert into U.S. dollars.

Nigeria Should Not Follow El Salvador’s Footsteps Says Hanke

Following the economists’ statements with Kitco’s David Lin, Hanke also shared an article on Twitter written by News author Terence Zimwara. The article explains how the Central Bank of Nigeria (CBN) has been discussing the country leveraging a digital currency by the year’s end. Hanke did not like this assessment from the CBN and said if it was like El Salvador’s idea, it would likely lead to ruin. Hanke tweeted:

If Nigeria’s plans for a digital currency is anything like El Salvador’s Bitcoin plan, it will FAIL. Instead of toying with nutty ideas, Nigeria needs to establish a USD-denominated Currency Board, like the one it had between 1913-1959.

Zimbabwean fintech lawyer and crypto proponent Prosper Mwedzi responded to Hanke’s statement about Nigeria and said: “I think a digital currency for Nigeria could improve bc access to financial services depending on [the] design.” Further, a number of others disagreed with Hanke’s commentary and replied to his scathing Nigeria/bitcoin tweet.

“Hanke only has a hammer (USD Currency Board) so to him, everything looks like a nail,” another individual wrote. “Bitcoin has no such restrictions and will keep saving weak economies,” the person added.

What do you think about Steve Hanke’s commentary about El Salvador and Nigeria? Let us know what you think about this subject in the comments section below.

Posted on Leave a comment

Bitcoin Volatility in July? 16K BTC Unlocking on Grayscale Coming Up

With the second quarter of 2021 almost done and July just around the corner, bitcoin might be headed towards a highly volatile month, and Grayscale could receive the blame. This is because one of the largest unlockings from GBTC will take place in the middle of the month as accredited investors will receive access to over $600 million worth of BTC.

Volatility in July Because of GBTC Unlocking?

Founded in 2013, Grayscale is the leading digital asset manager enabling institutional investors to receive exposure to BTC, and other cryptocurrencies, through its funds without having to worry about storing and managing their holdings.

In return, they agree to pay a specific commission and to follow precise rules. One of which dictates that their Bitcoin holdings will be locked for six months. Meaning, once they purchase GBTC shares, they would have to wait half a year before receiving the chance to realize gains.

With Grayscale’s popularity blossoming in late 2020 and early 2021, numerous accredited investors used the company’s products to purchase shares, tracking the performance of the primary cryptocurrency.

Consequently, some of them had their assets unlocked just recently, but the most substantial quantity will come on July 18th.

As Bybt’s graph demonstrates, Grayscale customers will receive the equivalent of over 16,000 bitcoins on that date. With today’s USD prices, this sizeable amount represents nearly $650 million.

Grayscale GBTC Unlocking. Source: Bybt

Although it’s debatable if all investors would decide to dispose of their assets immediately, such a considerable portion of BTC’s liquid supply could most certainly lead to enhance volatility once it’s unlocked.

Bitcoin in July

Historically, July is actually among the most bullish months for bitcoin, especially in the past few years. Apart from the year-long bear market in 2019 when BTC dipped by 6.6% in July, the cryptocurrency has spiked by double-digits in 2017, 2018, and 2020.

In fact, last year was the best-performing July since Bybt keeps data (meaning – 2013). Some experts have even argued that July 2020 was the actual start of the bull market because it was the first month deep in green after the halving.

Keeping in mind the aforementioned unlocking, this year’s July would be intriguing to follow.

Bitcoin Monthly Performance against USD. Source: Bybt

Posted on Leave a comment

Bearish or Bullish? Bitcoin Traders Argue Over Death Cross Outcome

On Saturday, cryptocurrency analysts and traders have been discussing bitcoin’s recent chart patterns and the infamous death cross pattern has been a topical conversation. A number of traders believe when bitcoin’s short-term moving average (MA) dips below the long-term MA, the crypto asset could be bracing for a major sell-off. Meanwhile, others are sure the death cross technical pattern means the price is due to rebound and possibly double-top to higher values than the previous all-time high.

The Return of the Infamous Death Cross

On June 19, a number of Twitter conversations, forum posts, and even headlines discussed the technical pattern called the death cross in regard to bitcoin’s (BTC) chart. Bloomberg published an article concerning the death cross on Saturday and the publication featured a few statements from billionaire investor Mark Cuban. The definition of a death cross stemming from Investopedia notes the pattern suggests “the potential for a major sell-off.” The website’s definition adds:

The death cross appears on a chart when a stock’s short-term moving average crosses below its long-term moving average. Typically, the most common moving averages used in this pattern are the 50-day and 200-day moving averages.

However, the death cross doesn’t necessarily mean a bearish market is due. Investopedia details that death cross events led to traditional stock market crashes during the past century including 1929, 1938, 1974, and 2008. Death crosses are not unusual and data from Canterbury Investment Management indicates the Dow Jones Industrial Average has experienced 84 death crosses since 1929. The popular economist and trader Alex Krüger discussed the situation of a death cross in relation to BTC/USD charts on Sunday.

“The Death Cross takes place when the 50 day moving average crosses below the 200 day moving average,” Krüger tweeted. “The Death Cross takes place when the 50 day moving average crosses below the 200 day moving average. Journalists love writing about how a death cross could bring forth a bear market. However, one week historical returns following a bitcoin death cross are POSITIVE. Relax,” Krüger stressed.

Picture via Alex Krüger on Twitter.

The popular creator of the bitcoin stock-to-flow model, Plan B, also tweeted about the infamous death cross on Sunday. “Study this chart to see what happened [the] last two times the death cross happened, Q4 2019 and Q1 2020,” Plan B said to his 566,000 followers.

Picture via Plan B on Twitter.

However, an individual named Mohit Sorout responded to Plan B’s tweet and noted that there’s been a number of death cross occasions throughout bitcoin’s lifetime.

“There have been 6 past death crosses in bitcoin’s lifetime,” Sorout replied to Plan B. “4 have resulted in enormous downside. The two that didn’t lead to a downtrend were towards the end of a bear market, not after a full blown bull run. Choose your bias wisely,” he added.

Bitcoin Traders Hope a 2013 Double-Top Pattern Emerges

The creator and host of CNBC’s Crypto Trader show Ran Neuner also wrote about the death cross on Sunday. “Bitcoin shorts are being closed,” Neuner said. “This is confirmation that the shorts were speculative and that it wasn’t miners hedging. We said this would happen in anticipation of the ‘death cross’ that should cross around the 24th June. Expect more FUD. I’m not selling.”

Picture via Sultan on Twitter.

A crypto enthusiast called Sultan discussed the death cross situation with his followers as well and said that it may mean the worst is behind us. “Death cross,” Sultan wrote. “Ironically, death crosses are often a sign that the worst is already behind us. At the 2019 DC, Bitcoin had already went through a -47% dip before the DC flashed, with a 52% recovery after. And a -64% dip before the 2020 DC, with a quick 150% recovery,” he added. Another person wrote to Plan B and said:

A real death cross is when both MA’s are facing down. Good luck to anyone trading the current cross on BTC.

No one really knows what will happen even though a number of traders are confident their predictions will play out. Investor and market watcher John Hostetler also talked about the death cross scenario as well on Sunday. “Only a fool could deny that this Bitcoin DeathCross is more like a bearish cross in red than a bullish one in green,” Hostetler said. “But I do like how the BTC price fell this week, as if to say ‘let’s get it over with, then we can rise’”

“In the end, the cross changes little,” Hostetler further stressed. “Big question remains: has this halving cycle peaked? 2 weeks ago I would’ve assigned that a 1% possibility, because I hadn’t looked at the now-dismal chart of Bitcoin S2F multiple in a while. Since then I have raised the odds to ~20%. But that still leaves 80%. So I continue with the Bitcoin double top model, drawing hope from the summer of 2013, when $BTC came within a breath of a Death Cross: grey arrow on the chart,” he concluded.

What do you think about the bitcoin death cross chart pattern? Do you expect a bear market or a bull market going forward? Let us know what you think about this subject in the comments section below.

Posted on Leave a comment

Russian Billionaire Oleg Deripaska Urges Bank of Russia to Move to Bitcoin

The Russian oligarch Oleg Deripaska blamed the Bank of Russia for its strict regulations imposed on digital assets. In his opinion, the central bank obstructs the citizens from involving in cryptocurrencies like Bitcoin.

Russia Should Add BTC As a Payment Method

One of the wealthiest Russians – Oleg Deripaska – used his Telegram account to criticize the Bank of Russia on its crypto stance. He surmised that the country should add the primary cryptocurrency as a payment method, giving an example with the Latin country of El Salvador, which already laid the foundations:

”Even poor El Salvador, known for being close to oft-mentioned Honduras, has realized the need for digital currencies and taken a simple path, recognizing Bitcoin as a means of payment.”

Furthermore, the oligarch outlined Russia’s need to execute business deals effectively with the rest of the world and urged the central bank to adopt a ”real financial instrument enabling independence in foreign trade settlements.”

Oleg Deripaska, the founder of the largest charitable foundation in Russia – Voloe Delo, was once the richest man in the country but lost the first spot after the financial crisis in 2008. The industrialist is also the founder of Basic Element. As of June 2021, Forbes estimates his wealth at $4.8 billion.

But despite his charity activities and business achievements, Deripaska caught the attention of the United States Department of the Treasury. In April 2018, the US authorities accused him of threatening the lives of business rivals, taking part in extortion and racketeering, and illegally wiretapping a government official.

Oleg Deripaska. Source: Forbes

Crypto Regulation in Russia

As CryptoPotato reported, the officials in the largest country by landmass have decided to legally recognize cryptocurrencies as properties. This legislation would mean that crypto investors with exceeding transactions of 600,000 rubles ($8,184) per year must declare them in front of the authorities.

Another point of the bill would be a 13% tax on gains made from such investments. If implemented, the law will require investors who fail to disclose the necessary information to be slammed with a 10% fine of the undeclared amount.

Furthermore, the bill indicated that a severe 40% penalty would be issued to people who try to escape the stipulated tax or to those who make incomplete payments.

Even though the regulations may sound strict, the initiative would grant Russian crypto owners the right to legal protection.

Featured Image Courtesy of FT

Posted on Leave a comment

Tehran Government Bans Iran Blockchain Association

The Ministry of Interior of the Islamic Republic has suspended the Iran Blockchain Association (IBA). The measure comes after the organization allegedly breached government regulations. IBA unites participants in the country’s growing crypto sector who are engaged in blockchain technology development.

Iranian Authorities to Review IBA Dealings With Crypto Exchanges

The Iranian government has moved this week to block activities of the Iran Blockchain Association, the Financial Tribune business daily reported on Sunday. The Ministry of Interior banned the prominent crypto industry organization following various accusations including that the IBA was operating against its own articles of association.

According to a notice published by the Persian-language newspaper Hamshahri Online on Wednesday, IBA was also ordered to submit detailed reports about its financial performance and activities to Iran’s Social Affairs Organization. The government is particularly eager to learn more about the association’s interactions with cryptocurrency exchanges, the publication revealed.

Earlier in June, a member of the Iranian parliament, Rahim Zare, accused “domestic NGOs involved in cryptocurrencies” of transferring foreign currency overseas, without providing any evidence to support the claim. IBA strongly denied any wrongdoing stating that its efforts were focused on promoting blockchain technology development.

Established in 2017, the Iran Blockchain Association operates as a nonprofit and self-governing body of entrepreneurs, experts and activists involved in the blockchain industry. One of its key priorities is to spread awareness among Iranians and prevent losses from cryptocurrency scams. The association stated:

Informing people and the authorities on risky websites and fraud cases is among IBA’s objectives.

Iran Blockchain Association Hit After Exposing High-Risk Crypto Companies

The new government notice was never delivered to the association and its board members, the head of the IBA Sepehr Mohammadi said in a press release on the its website. The publishing of a crypto alert could have become the main reason for the ban, he pondered. The IBA recently released a list of high-risk domestic companies involved in cryptocurrency-related business. Mohammadi further commented:

Obviously, vested interests will do anything to stop IBA’s efforts. They managed to publicize the notice before IBA was informed.

With rising crypto prices over the past year, a growing number of Iranians have started investing in bitcoin and other digital assets, turning away from traditional markets such as forex, gold and stocks. A recent study by the Tehran Chamber of Commerce has estimated that around 12 million Iranians have already put money into cryptocurrencies. Bitcoin trade in Tehran alone amounts to around 30 – 40 trillion rials ($130-174 million), found a separate study carried out by the High Council of Cyberspace.

In March, the Central Bank of Iran (CBI) ordered the country’s domestic payment settlement network Shaparak to block online payment gateways of crypto exchange websites. The IBA criticized the move stating that measures against innovative technologies are costly and unsuccessful.

“Technology moves forward come what may,” the association said, warning that the blocking of local crypto portals will simply push Iranians towards foreign platforms. Similar concerns were echoed by Iran’s economy and finance minister Farhad Dejpasand who concluded this month that the government cannot stand in the way of crypto development indefinitely.

What’s your opinion about the ban imposed on the Iran Blockchain Association? Share your thoughts on the case in the comments section below.

Posted on Leave a comment

Bitcoin Price Analysis: BTC At 11-Day Low, is $30K Retest Incoming?

Bitcoin is down by a sharp 5% today as the primary cryptocurrency violently breaking down support at $35K. As of now, bitcoin is trading at its lowest price range since June 9.

Just five days after things started to look short-term bullish, as BTC surged above the 20-day MA to reach resistance located at $40,760 (bearish .382 Fib), Bitcoin about to conclude another bearish week.

The bigger picture hadn’t changed – since the May-19 huge liquidation crash, Bitcoin price is trading inside a choppy zone between $30K and $42K. Tuesday’s daily candle, which recorded a high of $41.3k, had quickly turned into a bull trap. Since then, BTC’s price lost almost $8K.

Looking at the smaller timeframe, BTC could not break above the upper boundary of the range ($42K) and quickly lost momentum. On Friday, it broke beneath the 20-day moving average line and then headed beneath $36,000. In doing so, BTC also broke down the lower angle of a rising wedge pattern (mostly textbook bearish) that we were tracking over the past week, and can be clearly seen on the following short-term’s 4-hour chart.

Since breaking beneath the wedge, the bulls attempted to defend the $35,000 support. However, this level couldn’t resist, as of writing these lines, and BTC is trading close to $33k.

What is important to note is that the recent price drops are occurring on lower trading volumes compared to May’s trading volume levels.

According to data from leading exchanges as can be seen below, the commutative volume has steadily remained beneath 50K BTC since the start of June. This is much lower than the ~150K BTC levels that were common around the mid-May capitulation. Low volume – no interest and market that can easily shift.

BTC Cumulative Volume. Source


Looking forwards, the recent breakdown beneath $34,000 might send BTC for another retest of the lower range of the mid-term trading zone, or in other words – toward $30,000.

As mentioned above, BTC has been trading inside the wide trading range between $30,000 and $42,000 for a total of 32 days so far. BTC Is likely to remain choppy until a clear breakout of this range takes place.

BTC Price Support and Resistance Levels to Watch

Key Support Levels: $33,520 – $33,120, $32,465, $31,675, $31,000, $30,000.

Key Resistance Levels: $35,000, $36,000, $36,750, $38,420, $39,500.

Looking ahead, the first support zone lies between $33,520 and $33,120, this range saw a lot of price action over the past month. Beneath $33,000, support is expected at $32,465, $31,675, $31,000, and $30,000.

On the other side, the first resistance now lies at $35,000. This is followed by $36,000, $36,750 (20-day MA), $38,420, and $39,500 (early-June Highs).

The daily RSI is in the bearish favor as it sits deep beneath 50. The momentum is now approaching the most oversold for June, and a break beneath the June low (around 30) is likely to send BTC back to $30K.

Bitstamp BTC/USD Daily Chart

BTC/USD Daily Chart. Source: TradingView.

Bitstamp BTC/USD 4-Hour Chart

BTC/USD 4-Hour Chart. Source: TradingView.

Posted on Leave a comment

Is DeFi Summer bound to repeat itself in 2021?

It all started when the Compound protocol released its own governance token Compound (COMP), thus popularizing the concept of staking. COMP helped usher in the liquidity mining frenzy we see today and, during that time, we also witnessed how Yearn Finance’s native token, YFI, became the first cryptocurrency to ever surpass the price of Bitcoin.

With the recent price correction and looming predictions from analytics predicting bearish times ahead of us, is it possible that a DeFi summer 2.0 is just around the corner?

Characteristics of the last DeFi summer

The industry is much more mature now than it was last year according to the data. The Total Value Locked (TVL) on DeFi protocols now sits at $54 billion after peaking at $86 billion just last month, a massive surge from the $680 million registered at the beginning of 2020.

The volume and number of users on decentralized exchanges (DEXs) have also registered exponential growth with each passing month. Just last month DEXs reported a record of more than $140 billion in trading volume.

Interoperability wasn’t a thing back then either, which meant that DeFi projects operated primarily isolated from each other. Nowadays, thanks to the advent of cross-chain technologies, DeFi is becoming an increasingly connected space.

New trends in the DeFi market

The trend of food-related tokens like SushiSwap and Pickle Finance seems to be here to stay, but what else can we expect in the eventuality of a second DeFi summer?

There is now a surge of “second generation” DeFi tokens that offer a variety of use cases and a multitude of cross-chain liquidity partnerships, where protocols are able to leverage liquidity between each other. These second-generation tokens can be used in multiple different blockchains and can be used for different use cases such as minting NFTs, staking, etc.

New derivative services, including synthetic assets that represent stocks and other real-life commodities, new insurance services, from which Tether insurance is becoming increasingly sought after, and the continuous growth of the non-fungible tokens (NFTs) space are some other tendencies to keep an eye on.

Another trend that has been building for a while is the evolution of Automatic Market Maker (AMM) exchanges. This breed of DEXs provided an entirely new trading model and has taken the crypto world by storm. Instead of conventional order book-based exchanges, AMM-based DEXs allow users to trade directly with liquidity pools and use an algorithm to set up the prices based on the depth of the assets available.

Now, these exchanges are evolving and becoming more complex, providing aggregation models, privacy features, among many other useful tools that further add to the use cases of DeFi

New technology spells bullish signs for DeFi

Perhaps the most crucial development in the space is the scaling solutions being adopted.

With Eth 2.0 potentially still years away from its final release, the high fees and congestion of the Ethereum network have highlighted the need for alternatives. The state of the network has improved considerably in recent weeks, transaction fees have already plummeted from their all-time highs due to fewer transactions, but there is a growing usage of Layer 2 scaling solution like Polygon (MATIC).

Older networks like OMG, previously known as OmiseGo and of one the oldest scaling solutions, and Raiden network, Ethereum’s version of Bitcoin’s Lightning Network may be not meet the high demands of the DeFi ecosystem.

Binance Smart Chain (BSC) has gained a lot of ground in the last couple of months, foregoing some decentralization in favor of scalability. But although many DeFi projects choose to migrate to or adopt BSC, the network has recently been faced with congestion and a rising number of attacks on its DeFi projects.

On the other hand, Polygon is now emerging as a serious contender, recently surpassing BSC and even Ethereum in daily transactions. Polygon offers many scaling solutions that include sidechains and rollups, a technology to bundle transactions off-chain. Many Ethereum native DeFi projects, such as Aave and Kyber Network, are migrating to Polygon as the platform becomes fast-tracked to become the go-to scaling solution.

Impact of institutional investors flocking to DeFi

After the large $1.5 billion Bitcoin purchase by Tesla, more and more companies are looking to enter the crypto space.

Seen as a valuable and secure store of value, Bitcoin gives institutional investors an alternative form of investment and a hedge against fiat inflation and geopolitical uncertainty.

DeFi, however, takes it a step further. Yield farming protocols offer a most valuable alternative to traditional banking interest rates, which are already near-zero in countries like the US. A multitude of different financial assets catered towards institutions is also being developed on the blockchain, including decentralized insurance services like Nexus Mutual that allow significant risk mitigation.

Institutions also worry about the legitimacy of DeFi platforms, that is why the Chicago DeFi alliance and other companies like Trustology are launching liquidity launchpads that act as “DeFi firewalls”. DeFi projects are filtered and evaluated in terms of compliance, governance, and smart contract code for institutional and professional investors to safely enter the industry.

While multiple venture capital firms like Grayscale and Chicago DeFi alliance have already dove into space, extensive blockchain research also shows that several Ethereum whale wallets belong to larger Fortune 500 companies such as Microsoft, IBM, Amazon, and Walmart.

With added capital flowing into the market from these companies, the DeFi space will gain credibility and become more liquid and less volatile.

What can we expect in the long term future for DeFi

The potential of DeFi is so great it is often hailed as the future of finance. We are witnessing the democratization of financial services, as DeFi allows anyone to build their own financial instruments and share them with others over the blockchain.

In a recent interview, shark tank investor and crypto enthusiast Mark Cuban was quick to highlight the considerable threat DeFi poses to traditional finance, stating that “banks should be scared.”

Replicating the current financial infrastructure on the blockchain could prove highly beneficial and help reduce costs in global payments, investment banking, and asset management. The advantages of automated and trustless systems like DeFi could potentially cannibalize a large portion of capital currently held in the traditional financial market.

However, it is almost sure that both ecosystems will co-exist. Some of the great advancements concern interoperability within the sector itself and building bridges between DeFi and the traditional financial sector.

Improved oracles, which feed increasingly more accurate real-world data, as well as crypto-backed derivatives that represent real-world commodities like stocks are some examples of increased interconnectivity between DeFi and CeFi.

The road ahead

However, for mainstream adoption to happen, user experience needs improvement. Complex protocols need to be made even more straightforward for end-users through friendly interfaces. Another major hurdle is also the lack of legislation.

In order for Decentralized Autonomous Organizations (DAOs), the governance model behind many DeFi projects, to have an impact outside of crypto, they must abide within a legal framework. However, the whole DeFi is still in the wild west stages and resembles the ICO craze of 2017 with unsupervised activity and a lack of regulatory clarity and Know Your Customer (KYC) policies.

If these hurdles can be overcome, it only speeds up the DeFi revolution that will happen in upcoming decades.

The post Is DeFi Summer bound to repeat itself in 2021? appeared first on CryptoSlate.

Posted on Leave a comment

Bank of Uganda Launches Regulatory Sandbox Framework — One Fintech Firm Already Approved

The Bank of Uganda (BOU) has announced the launch of a regulatory sandbox that will allow fintech start-ups to test their innovative financial solutions in a controlled environment. Already, one firm, M/S Wave Transfer Limited, has received approval to test its quick response (QR) technology under this sandbox arrangement.

BOU Launches Regulatory Sandbox for Fintech

In its statement on June 15, the BOU says it is now inviting more firms to develop and similarly test their financial innovations under this framework. Meanwhile, the BOU statement also expands on why the central bank has chosen to launch the sandbox. The statement explains:

The Regulatory Sandbox Framework will promote financial services innovation, attract capital and funding for fintech firms, and provide shared learning opportunities for the innovators and regulators. This is expected to promote uptake of electronic payments, digital financial services and financial inclusion in general.

Meanwhile, according to a March 5, 2021 Ugandan government statutory instrument, the BOU will conduct “a fit and proper test on each substantial shareholder, director or manager of the applicant.” In addition, the central bank will also determine if “an applicant meets the criteria and minimum requirements for operating a sandbox.”

According to the statutory instrument, some of the determining factors that the BOU will consider include whether the innovation is genuine or whether the sandbox has consumer benefits and safeguards. The central bank will also consider the sandbox’s readiness for testing as well as the suitability of the exit plan.

In the meantime, the legal document says fintech start-ups that wish to be included in the regulatory sandbox framework will have to pay an application fee of about $290 (one million Ugandan shillings).

What are your thoughts on the BOU’s launch of the regulatory sandbox framework? Share your views in the comments section below.