Uganda Targets Cryptocurrencies in Ponzi Scheme Crackdown

Ugandan legislators are exploring the role of cryptocurrencies in connection with pyramid scheme frauds that are often found in the country, local newspaper PML Daily reported on Feb. 4.

While legislators are moving forward with a proposal to criminalize Ponzi schemes, cryptocurrencies may come under fire as well.

Speaking at the parliament, the State Minister of Finance David Bahati revealed that the government has established a task force to explore cryptocurrencies and their potential applications in Uganda. The task force will also focus on global industry 4.0 trends that could result in major developments for the country and region.

Though Uganda’s attitude to cryptocurrencies is one of the more welcoming in the region, its citizens have fallen victim to a number of scams.

The government’s latest initiative seeks to educate citizens and discourage them from investing in Ponzi schemes. A wider ban is also being proposed, as Bahati explained:

“We are also discussing with the Internal Affairs Ministry to ban such schemes. The challenge is that operators of such schemes register as financial institutions but when they get on the ground, their operations are different.”

Cryptocurrencies are often used by the fraudsters to collect the money, which put them under the government’s radar:

“We have continued to advise the public to desist from investing in cryptocurrencies since they are yet to be supervised and regulated in Uganda. We have, therefore, strongly encouraged the members of the public to do their business transactions with only licensed financial institutions.”

Bahati also revealed that the Ministry of Justice is currently amending the Penal Code Act to criminalize Ponzi schemes, while also adopting clear guidelines to correctly identify the owners of a newly registered company.

Furthermore, the country’s Anti-Money Laundering Act is being modified to include virtual assets providers under the regulation’s umbrella.

“This will bring virtual assets service providers including providers of cryptocurrencies to be brought under the purview of the Financial Intelligence Authority,” explained Bahati.

However, parliament member Mwine Mpaka accused the government of protecting the creators of Ponzi schemes:

“The Financial Intelligence Authority submitted a list of all companies involved in this fraudulent business and the Ministry of Finance knows them but they are quiet.”

Mpaka then revealed that he knows a bishop involved in the business, noting that he is “heavily guarded.”

The Parliament’s speaker Rebecca Kadaga then noted that the issue of pyramid schemes had been often raised, but no action was taken. The latest initiative may have been prompted by a petition from the victims of the Dunamiscoin scam, submitted in January.

The scheme is alleged to have stolen approximately $2.7 million from investors and employees. The company promised 40% returns over the initial investment.

Source Cointelegraph

China’s Crackdown on Cryptocurrency Trading: A 2019 Recap

While China has waged war on domestic cryptocurrency trading activities since 2017, this year saw it tighten the screws as hype around crypto’s underlying blockchain technology renewed interest in digital assets. Below is a summary of China’s difficult relationship with crypto and how it has evolved in 2019.

China does not like crypto trading

As Cointelegraph reported in September 2017, Chinese regulators placed a ban on local cryptocurrency exchanges, forcing them to close. Shortly after the ban, news broke that the government sought to crack down on all domestic cryptocurrency trading, not just commercial exchanges. 

At the beginning of 2018, local authorities also started taking action against market-making platforms and other “exchange-like” services that interacted with cryptocurrencies.

After finally completing the crackdown on local cryptocurrency trading businesses, China started adding offshore cryptocurrency exchanges and initial coin offering websites to its so-called Great Firewall.

Still, the ban proved ineffective as reports started circulating that Chinese cryptocurrency traders continued their activities by using virtual private networks to bypass the firewall. More recent reports suggest China’s fight against cryptocurrency trading has not yet ended.

Related: Five Countries Where Crypto Regulation Changed the Most in 2019 

In late November, reports suggested that at least five Chinese cryptocurrency exchanges had halted or chosen to terminate operations. During the same month, Shenzhen authorities identified a total of 39 exchanges that broke China’s cryptocurrency trading ban and initiated corrective measures against them. 

Blockchain, not Bitcoin

Despite its hardline stance on cryptocurrencies, the Chinese government has expressed clear support for crypto’s underlying blockchain technology, with President Xi Jinping calling on the country’s innovators to prioritize its development.

While official endorsements have increased the hype surrounding blockchain, state media have warned the public against speculation in cryptocurrencies. 

Confusingly enough, following President Xi’s call to action, the state-run Xinhua News Agency published a report recognizing Bitcoin (BTC) as “the first successful application of blockchain technology.” 

Indeed, Chinese regulators worry that the endorsement of crypto’s underlying ledger may result in renewed interest in cryptocurrency-related activities. Earlier this week, securities regulators issued a warning for local companies, stating that the Chinese government plans to renew its crackdown on cryptocurrency trading. This month, China also hinted that its treatment of cryptocurrencies such as Bitcoin may change again as it looks to reform its forex markets.

Overall, the Chinese government seems to like the safe data management potential of blockchain, but not its decentralized and permissionless nature as well as the speculation enabled by crypto assets. As Coinitelegraph recently reported, the deputy director of China’s central bank Mu Changchun said that the digital yuan will be different from Bitcoin and stablecoins in that it will just be a digital form of the currency, and will not allow for speculation.

Source Cointelegraph

5 Crypto Exchanges Halt or Shut Services Amid Perceived Crackdown

At least five Chinese cryptocurrency exchanges have halted or chosen to terminate operations this month in response to a perceived redoubling of Beijing’s anti-crypto stance.

Exchange operator Bitsoda informed the public on Nov. 23 of its decision to terminate services; Akdex followed suit, announcing its decision to shut down on Nov. 24. 

Also on Nov. 24, Idax cited Chinese government policy as the basis for its decision to prevent domestic clients from using its service.

Likewise, with explicit reference to government policy, Btuex revealed on Nov. 25 that it would halt services immediately and reopen in the future for an overseas-only clientele. 

On Nov. 4, crypto exchange Biss had announced it was “actively cooperating” with investigations into its operations and planned to resume services as soon as possible. 

Since then, it has been reported that authorities had arrested 10 suspects connected with the exchange. While information surrounding the arrests remains piecemeal, reports claim that regulatory authorities found Biss’ services to be in violation of Chinese capital controls.

Blockchain, not Bitcoin

With exchanges and operators falling into line, Bloomberg has this week published a report claiming that these recent developments represent “the biggest cleanup of the sector” since Beijing’s historic rout in Sept. 2017.

Citing data from blockchain intelligence firm Chainalysis, Bloomberg’s report notes that 20 of the top 50 global crypto exchanges are based in the Asia-Pacific region, accounting for an estimated 40% of Bitcoin transactions in the first half of 2019. Within Asia-Pacific, Chainalysis’ data indicates that the lion’s share of exchanges are based in China.

Beijing’s reaffirmation of its hardline stance has been interpreted as a bid to prevent what it perceives to be the speculative excesses associated with crypto trading, which it purportedly fears could increase following a major public endorsement of blockchain by President Xi Jinping in October. State media has since cautioned the public to remain “rational.”

Clarity or clampdown?

Katie Talati, head of research at Los Angeles-based asset manager Arca, told reporters:

“It appears that, like everything else within their borders, China feels it needs to have tighter controls on the crypto market including exchanges, miners and asset issuers.”

Talati nonetheless argued that Beijing’s position is evolving in a similar direction to that of Japan, where “tight and clear regulations for crypto businesses” are being established.

Local traders appear nervous nonetheless: as Bloomberg notes, wallet app Imtoken reported a twofold increase in Tether (USDT) transactions among its 10 million users on Nov. 22, purportedly in response to fresh warnings from Chinese regulators. USDT is commonly used as a vehicle to move between digital and fiat currencies.

Binance’s official account on major Chinese microblogging website Weibo was suspended in mid-November, as well as that of the Tron Foundation —  the development organization behind the 11th biggest cryptocurrency Tron (TRX).

As Cointelegraph reported, crypto exchange IDAX has today suspended deposits and withdrawals generally after its CEO allegedly disappeared. 

In the wake of its announcement it would cease to serve Chinese users, the platform had earlier this week warned it was seeing a run on withdrawals. It has now further revealed that the whereabouts of IDAX Global CEO Lei Guorong are unknown and that it has — as a precautionary measure — locked-down its cold storage wallet to protect user funds.

Source Cointelegraph

Citizens Want BTC Over Peso Amid USD Crackdown

Argentina’s central bank had formally banned consumers from purchasing Bitcoin (BTC) and other cryptocurrency using credit cards on Nov. 1. What followed was the very opposite of what the Argentine government had anticipated — over the past two weeks, the country has traded the highest amount of Bitcoins on the peer-to-peer platform LocalBitcoins, according to data by CoinDance.

Weekly trade volume of LocalBitcoin for Argentine peso

Argentina’s fragile economy

One of the biggest factors in the high adoption of crypto in the country is the high volatility of the Argentine peso. In just the past five years, the value of the peso against the United States dollar has fallen by over 85%. The residents of the country have traditionally had little confidence in their currency, favoring to convert their spare pesos into relatively stable dollars.

The country’s sovereign currency is the peso, which people earn and spend, but it’s the U.S. dollar that defines the value of goods and services. The peso–dollar exchange rate is quoted daily by the media, alongside weather and traffic reports.

Looking at the economic situation of Argentina, crypto bull Tim Draper advised the president of Argentina in March 2019 to legalize Bitcoin in order to improve the country’s economic situation. He counseled the president on crypto’s potential to improve the devaluation of the Argentine peso and relieve the associated brain drain. 

Daniel Popa, CEO of the Anchor stablecoin, told Cointelegraph that despite the volatility of crypto, Argentinians trust it more as a store of value than the peso because Bitcoin cannot be manipulated by the government, adding that:

“Unfortunately, bitcoin does not offer predictability, underlining the ongoing need for a universally-accepted stablecoin and financial standard that could be adopted by anyone in the world, including those suffering from the negative economic impacts that stem from war, natural disasters, health crises, and disruptive monetary policies.”

Crackdown on forex

To give some historical context, in the 1990s, the peso was pegged to the dollar by the government of President Carlos Menem in an attempt to stifle inflation. The dollar peg damaged exports, pushing the state to take on more debt to remain afloat amid a worsening economic crisis. The peg was lifted in 2002. However, the dollar had already been ingrained in Argentine culture.

On Sept. 1, the Central Bank of Argentina had imposed restrictions on U.S. dollar purchases to revive the plunging peso. Citizens’ purchases made in dollars were limited to $10,000 a month, requiring special permissions beyond that limit. The bank also said it would restrict dollar purchases to $200 per month via bank account and just $100 per month in cash, until December.

Talking to Cointelegraph about the government’s crackdown on forex, Salomon Ptit Haddad, the head of institutional sales at Enigma Securities, said, “Given the current degree of uncertainty, the BCRA board of directors decided to take a series of measures that seek to preserve the reserves of the Central Bank.” Haddad went on to add:

“The Argentine Central Bank can easily impose restrictive measures on the use of bank cards, with local banks having to comply with the guidelines imposed by the country’s central bank. Argentina, which has a $50 billion debt to the IMF and is trying to get out of the economic problems it is facing.”

Ban on crypto purchase with credit card

Keeping up with the trend to increase the adoption of peso, the Central Bank of Argentina announced on Oct. 31 that citizens are prohibited from using credit cards to buy cryptocurrencies. Haddad believes that this regulatory policy is aimed at protecting the national currency at the cost of crypto, since Argentine citizens tend to exchange crypto back into the dollar either offshore or in the country. 

He also added that since November this year, the BCA has mandated all card issuers to be registered prior to distributing new cards, “This has generated great uncertainty within the South American country, where it is customary to have cash and dispense with banking systems.” Haddad went on to add:

“Now, after this measure, the cryptocurrencies can be a way to preserve assets for those who want to save, bearing in mind that the origin of people looking for a stronger asset is the devaluation of the local currency, which has been devalued by 50% so far this year.”

We have seen it time and again in countries like India and China, where crypto trading volumes surge upward following a ban. Talking about how this move led to an increased interest in crypto, the co-founder and chief operations officer at ShapeShift exchange, who simply goes by “Jon,” said:

“Capital controls seem to have a direct correlation with getting people more interested in Bitcoin because it’s something the government can’t control. The population of the country sees these capital controls are put in place and then they’re going to look for a way around it. That’s where Bitcoin and crypto come in, as they give a good way to store and transfer values when they’re dealing with this type of uncertainty.”

Institutional help in adoption

Argentina’s deputy minister of finance, Felix Martin Soto, claimed in March this year that the government should approach crypto and blockchain tech as a way to improve Argentina’s financial inclusion and reduce state costs.

He had also asserted that promoting the crypto industry in the nation will serve to reduce its demand for dollars, which will ultimately commit to preserving the local market and attracting global investment. 

Soto is not the only one who is pro-crypto. Upon being elected in 2015, President Mauricio Macri was perceived to be good news for the legal status of Bitcoin in the country. He was the one to sponsor the First Bitcoin Forum in Buenos Aires in July 2015. Although, his enthusiasm for cryptos didn’t seem to last for too long. Jon gave two reasons as to why the president slowed his fondness toward crypto:

“1) It’s hard to focus on Bitcoin regulation while trying to keep the government stable and national currency inflation down so people can afford to live; and 2) he’s probably running into bureaucratic pushback for various reasons.”

Apart from the forum, there have been other initiatives by organizations to spread crypto awareness. For example, nonprofit organizations Bitcoin Argentina and Bitcoin Americana launched an informational campaign called “Bitcoineta.” It consisted of a Bitcoin-branded van, jointly purchased by the two organizations, that went around Argentina to spread basic knowledge about cryptocurrencies among local communities.

A need for regulation, not restriction

2018’s edition of G-20, which was coincidently held in Argentina, mentioned crypto regulation. The officials stated their concerns regarding the crypto industry as well as their overall agenda for both the future and infrastructure development of the participating nations.

The conclusion of the summit saw a declaration titled, “Building Consensus for Fair and Sustainable Development,” which regards cryptocurrencies as an important part of an “open and resilient financial system” that “is crucial to support sustainable growth.” 

The document also highlights the necessities of Anti-Money Laundering and anti-terrorist measures as per the standards of the Financial Action Task Force, providing clear instructions to participating nations on crypto regulation.

Related: FATF AML Regulation: Can the Crypto Industry Adapt to the Travel Rule?

However, Argentina itself didn’t make much of an effort to regulate digital assets. The Argentine government has not implemented specific regulations on exchange, issuance or — in general — the use of digital assets. Regarding the Argentine government’s failure to take swift action on the regulatory front, Shapeshift’s Jon said:

“It’s hard to fully know why that didn’t happen, but my best guess is that the crypto regulation discussion got caught up in bureaucratic priorities. Unless the government, any government, really makes something a priority, other things just take precedence. I doubt there’s specific intent around not regulating crypto, rather it’s something they’ve just not gotten to yet.”

Argentina is the textbook example of how Bitcoin and other cryptocurrencies can find a use as a store of value, especially in economically vulnerable nations. If the government is serious about reducing their dependence on the U.S. dollar, it is becoming more apparent that they should embrace and understand crypto. Early adoption of digital currencies could help the country come out of its financial downturn.

Cointelegraph News

Markets Crash After Reports That Binance’s Shanghai Office Closed in Crypto Crackdown

Chinese authorities have reportedly raided and shut down the Shanghai offices of leading cryptocurrency exchange Binance. 

Citing unnamed local sources, The Block says that local police have shut down Binance’s offices after raiding the premises. Between 50–100 of the exchange’s employees reportedly worked out of the Shanghai location.

Binance has not responded to Cointelegraph’s requests for comment as of press time. 

Closure follows crackdown 

The purported raid follows a crackdown on cryptocurrency-related businesses and activities in the country. 

Recently, financial authorities in China issued a notice to the public, directing individuals to report businesses engaged in virtual asset trading to the Shanghai headquarters of the People’s Bank of China — the country’s central bank. Activities that must be reported include:

“Virtual currency transactions in the territory; the other is to issue ‘xx coins’ and ‘xx’ in the form of ‘blockchain application scenarios.’  Currency, fundraising or bitcoin, virtual currency such as Ethereum; third, providing services such as publicity, diversion, agency trading, etc. for registered ICO projects, virtual currency trading platforms, etc.” 

Notice from authorities on cryptocurrency-related activities. Source: Chain News

However, Binance told Cointelegraph that the company had not received this notice. Similarly, Beijing-founded Huobi told Cointelegraph that the company was familiar with the notice, but had not received it.

Offices are an outdated concept?

In a move of regulatory arbitrage, Binance opened offices in Malta in 2018 as the island nation ramped up its cryptocurrency-friendly regulatory projects.

Last month, rumors abounded that the exchange was opening offices in the Chinese capital of Beijing, despite the country’s decidedly anti-cryptocurrency stance. 

However, according to the firm’s CEO Changpeng Zhao, offices themselves are an antiquated concept. In a tweet on Nov. 19, Zhao said, “Office and HQ are old concepts like SMS and MMS. Time is moving on…” 

Markets react with major coins seeing red

Cryptocurrency markets have reacted to the news, with most major coins seeing significant losses on the day.

Cryptocurrency market visualization. Source: Coin360

Bitcoin (BTC) is seeing losses over 6% while leading altcoin Ether (ETH) has lost over 8% in the last 24 hours. Altcoins like Litecoin (LTC) and EOS are taking a beating with over 9% losses, while Binance’s own coin, Binance Coin (BNB), is down 10% at press time to trade at $16.58.

Source Cointelegraph

Chinese Authorities Plan Crackdown on Crypto Mining in Inner Mongolia

Regulators in the Chinese autonomous province of Inner Mongolia have issued a notice demanding a clean-up of the province’s crypto mining enterprises.

Terms of notice

As local crypto outlet ChainNews reported on Sept. 14, five departments within Inner Mongolia have determined the need to rectify the mining industry within the province. The organizations named were the Development and Reform Commission, the Public Security Department, the Office of the Ministry of Industry, The Financial Office and the Big Data Bureau.

According to the report, the regulators’ position is that

“The virtual currency ‘mining’ industry belongs to the pseudo-financial innovation unrelated to the real economy, and should not be supported.” 


China’s regulatory approach to cryptocurrency mining has been somewhat inconsistent, leaving it unclear exactly what this recent notice will mean for miners operating in Inner Mongolia. 

In a tweet reacting to ChainNews’ report, partner at Primitive Ventures and crypto commentator Dovey Wan wrote “I doubt this will have any impact.” 

Chinese arithmetic

As of the end of May, China was reportedly responsible for 70% of global BTC mining. At the time, reports emerged that Chinese regulators were investigating illegal mining operations in Sichuan — a province responsible for 70% of China’s Bitcoin (BTC) mining thanks to the electricity generation of the Dadu River Basin. 

Back in April, Cointelegraph reported that China’s National Development and Reform Commission was considering a ban on crypto mining throughout the country. 

The tentative ban led to speculation that mining would be forced to leave the country or go underground — a troubling proposition for the country that houses the majority of the world’s hash power. To date, no such ban has entered into law.


Cointelegraph News