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Museveni, Mutebile disagree on cryptocurrencies
Written by The Observer Team
President Museveni has hit at Bank of Uganda governor Emmanuel Tumusiime-Mutebile for being "dogmatic" and unwilling to adapt to new technology.
The two were speaking during the Africa Blockchain Conference which opened at Kampala Serena hotel today. The conference, organized by the Blockchain Association of Uganda, was reviewing the role of blockchain technology in Africa's transformation.
Blockchain is the world's latest and leading software platform for digital assets. It keeps a record of all data exchanges which is referred to as a ledger in the cryptocurrency world. Each data exchange is a transaction while every verified transaction is added to the ledger as a block.
Mutebile told the meeting that blockchain technology lacks the necessary prerequisites to work as a currency and that people who sell cryptocurrencies risk being burned when the bubble eventually bursts.
He cautioned that no cryptocurrency can match the legality of a national currency adding that the technology can only succeed in the presence of a legal provision to give a currency status to a crypto.
Bitcoin, the category creator of blockchain technology prides in being the "first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen."
"No cryptocurrency can match a well managed or original currency. Cryptocurrencies do not have the privileges of legal tender and are not backed by the central bank, which ensures the supply of the currency is always adequate with the demand. Furthermore, there are no external mechanisms for backing cryptocurrencies to ensure that they have a stable value. Consequently, cryptocurrencies are subject to extreme price volatility which renders them ineffective as a store value or unit of account." said Mutebile.
Mutebile argues that the emergency of cryptocurrencies should not divert Ugandans from the role played by central banks as stewards of public trust. He says the blockchain enabled cryptocurrencies values only depend on the subjective beliefs of the traders which are less trusted. He argues that they facilitate money laundering and financing of crime.
"Cryptocurrencies perform only two functions. First, they allow payments especially cross-border payments to be made anonymously there by facilitating illicit transactions such as money laundering and financing of crime. Second, cryptocurrencies offer an an avenue for speculation. However, unlike many other assets which attract speculators such as gold or equities, cryptocurrencies have no intrinsic value. Unless cryptocurrencies can command world wide acceptance as a medium of exchange, the demand for them will be negligible." he added.
Museveni hit out at the governor for being "dogmatic", saying there was a need to embrace technology advancement since it will enable quick service delivery. He then took the conference on a historical perspective on the evolution of money.
"What we’re talking about here is to look for at new technology of enabling things to move faster and new systems that go with it. Technology and systems. Of course, this is not new and, I would encourage the governor to be more inquisitive, not to be dogmatic. I congratulate him for reminding me about my S6 economics of 1966 - the role of money as a unit of account. To tell the value as a medium of exchange and as a store of value. As he knows, money itself changed up to 1930. Initially money was only gold and silver." Museveni said.
Beyond its application in cryptocurrency, blockchain is viewed as a revolutionary technology with the potential to change the way governments and institutions manage data as well as business.
Across the globe, governments and institutions are exploring possibilities of utilizing this technology beyond its current application in cryptocurrencies such as bitcoin. They are now looking into using this technology in management, insurance, payments, identity management, voting among others.
Museveni added that cabinet will debate the use of the technology and later come up with an official position on whether to adopt the technology or not.
"We’re going to discuss this among ourselves. You heard how the governor was violently against the idea. But you heard what I told him - from purely a historical perspective how money has evolved in the last 200 years. This is not a policy making session, its a brainstorming session. Policy will come from the results of the brainstorming not necessarily this one but from other sessions in cabinet." Museveni added.
Museveni says the technology should be appreciated because it is an innovation of professionals who are transparent and trust each other. He said the technology will replace the traditional way of secrecy with openness in doing business.
According to Dr Bitange Ndemo, the chairman of the Kenya Blockchain Taskforce, this technology can help the continent to fight drug counterfeits. He contends that 100 million Africans are affected by counterfeit drugs which can be checked through blockchain technology that tracks a drug from a manufacturer to the consumer.
Noah Baalessanvu, the director of the Blockchain Association of Uganda told the conference that transactions made through blockchain will be more trusted than the normal deals since it tends to do away with secrecy and making available data and information for people to use.
Baalessanvu notes that Uganda can benefit from blockchain by fighting counterfeit drugs by consumers scanning the drug codes to track its authenticity as well as counterfeit land titles.
"With blockchain, you’re able to track a drug from its manufacturer state right up to its dispensation. How it has moved, which hands have held it even to the temperatures of its movement. All this can be monitored and appended to a ledger. Immediately an ordinary user can be able to scan a drug and have its whole chain of custody. You’re automatically converting the end-user into an enforcer. If I scan a drug and don’t have its chain its most likely a counterfeit or questionable. This is possible with blockchain," he said.
Adding: "I want to specifically address the current benefits that a country like Uganda can derive from blockchain We’re currently dealing with uncertainty in the land tenure system where we have titles that cannot be trusted. When we put these land titles unto the blockchain, we’ll inherently give digital land titles trust because block chain addresses the common problem of duplication. Once our land tenure system is on the blockchain its immutable - meaning once a land title gets unto the blockchain, it can only be transacted upon legitimately because its being witnessed by a number of parties."