The findings of a recently published paper by researchers from Stanford University reveal that 74 per cent of Ugandan households do not have bank accounts. Yet Binance Uganda signed up 40,000 users within one week of its launch in October. Cryptocurrency is in high demand in Uganda.
Its new unit in Uganda is partnering with a local mobile payments provider that will convert fiat to crypto or vice versa. Ugandans who wanted to trade crypto were mostly reliant on peer-to-peer exchanges like LocalBitcoins or nearby services such as the Zimbabwean exchange Golix.
However, Kwame Rugunda, chairman of the Uganda Blockchain Association and co-founder of the Ugandan blockchain startup CryptoSavannah, believed that platforms hardly represent a “large population in the country that is unbanked” and “hungry” for access to cryptocurrency. “There’s a large consumer market for people purchasing cars, for example, because bitcoin is legal tender in Japan,” where the cars are manufactured, Rugunda said.
Digital assets are mobile, limitless, and can be used to manage liquidity. In addition, the prospective Ugandan users are still undergoing the know-your-customer (KYC) onboarding process, verifying their government-issued IDs. Binance was historically known for only requiring an email address to trade crypto-to-crypto.
Factors driving cryptocurrency adoption in Uganda are rampant unemployment and demand for imported products, Rugunda said. Meanwhile, in 2017, the International Labor Office estimated that almost 15 per cent of working-age Ugandans fewer than 30 were unemployed while those who were employed only had irregular or temporary work.
Remittance is a crucial factor driving demand for bitcoin in Uganda.
A 2014 national census revealed that nearly 10 per cent of Ugandan households received remittance from neighbouring Kenya. Since these transfers carry high conversion fees, the demand for alternatives increases. BitPesa CEO Elizabeth Rossiello noted that many Ugandans became sceptical of bitcoin after being defrauded. To Rosello, regulation and government support would make Bitcoin viable.
Based on his dealings with local authorities, Rugunda believes that there is increased openness to the cryptocurrency industry, including the establishment of a National Taskforce for Blockchain and Prince Kudra Kalema ‘s collaboration with the crypto startup, Wala.
“For Africa as a whole, this is just step 1 for Binance to serve Africa.”