BITCOIN AND IT'S ROLE IN E-COMMERCE

Bank of Uganda, on Tuesday February 14th, 2017, issued a press release that was circulated in the media, warning the General public about “One coin Digital Money’ operations in Uganda.

The statement by the Governor, warns that One Coin’s dealings in crypto-currency like Bitcoin, falls outside the regulatory Purview of the Central Bank. In my view, this was an oversight from Bank of Uganda as some forms of currency like Bitcoin, fall under the mandate of Bank of Uganda.

Bitcoin is a form of electronic currency that allows transactions to be performed without banks or any other middlemen. Despite some risks, Bitcoin is a very interesting and dynamic technology that can change how eCommerce will be conducted in the future.

When it comes to eCommerce, Bitcoins are a secure payment mode. They can be used to securely purchase items or transfer money across borders quicker and more efficiently.

Online Stores like Expedia, Microsoft & Virgin Galactic have embraced Bitcoin as a form of digital currency. Recently, Bitpesa in Kenya, announced a B2B service that allows business owners in Tanzania, Kenya, Uganda & Nigeria to send and receive payments within and outside Africa. Bitpesa has since had a falling out with Safaricom, that has declined to host the Bitpesa, Bitcoin service on their platform.

But, although Bitcoin may be an asset to eCommerce, it can also be (and has been) seen as a liability. Because Bitcoin does not reside in any given regulation, people can operate the network anonymously. This provides opportunities for criminal activities, including tax-evasion, terrorist financing and money-laundering.

Bitcoin exchanges/websites are also susceptible to hacking as was seen in February 2014, when Mt. Gox (Japan), which was once the world’s largest exchange for Bitcoin, filed for bankruptcy protection after reporting that 850,000 bitcoins, worth $450 million at the time, had disappeared or been stolen by hackers.

Although it’s used allover the world, Bitcoin lacks a specifically recognized legal and regulatory framework.  In countries like China, Thailand & Bolivia, Bitcoin has been banned. In China specifically, The Central Bank of China, in December 2013, banned financial institutions and payment services from Bitcoin-related business. This was done in order to avoid harm to the public and to the legal monetary status of their currency; that might occur as a result of “excessive speculation” in Bitcoin and other virtual goods. Third party service providers were also told to stop offering clearing services to Bitcoin exchanges.

In Australia & Argentina, Bitcoin is not legal tender but is also not illegal. In December 2013, the German Finance Department recognized bitcoins as a financial instrument similar to an international currency, which can be used to carry out private transactions or exchanged for other currencies, without being legal tender. However, in Japan, Bitcoin is recognized as legal tender in the form of digital currency. 

Although Uganda does not officially recognize Bitcoin as a form of currency, Section 3 of the Foreign Exchange act 2004 (the Act), defines “foreign currency” to mean a currency other than the legal tender of Uganda. It further defines “foreign exchange” to includebanknotes, coins or electronic units of payment in any currency other than the currency of Uganda which are or have been legal tender outside Uganda.

This would mean, that because Bitcoin is legal tender in Japan, it is foreign exchange in Uganda as envisaged under the Act.

Section 3 further defines a “foreign exchange bureau” to mean a person holding a license issued by the Bank of Uganda to engage foreign exchange business. “Foreign exchange business” is defined by the same Act to mean the business of buying, selling, borrowing or lending of foreign currency.

Consequently, any business that intends to buy, sell, borrow or lend Bitcoin, must do so under license from Bank of Uganda.

I was surprised to see the Central Bank distancing itself from Crypto-currency, especially after Uganda after the UNAFRI (United Nations African Institute for the Prevention of Crime and Treatment of Offenders) July 2016 roundtable conference that focused on virtual currency in Uganda.

As long as eCommerce continues to prosper, it may be wise for the Central Bank to offer some form of regulatory framework for Crypto-currency.  Although Bitcoin may be seen as risky, registering and issuing licenses to Bitcoin dealers, may be a prudent way for regulators to keep an eye on sellers, not only for ensuring compliance with the law but also for consumer protection. This will ensure compliance with tax laws and also give recourse to bitcoin users in cases like the Mt. Gox one above.

Bank of Uganda, may also decide to include them under agency banking since Bitcoin may be lent or exchanged with local currency. This has been done in Germany, when in July 2013, when Bitcoin Deutschland GmbH, the company that manages the exchange platform Bitcoin.de, entered into a partnership with Fidor, a bank, in order to provide banking services to Bit- coin.de clients.

In order for Bitcoin to be fully relevant to eCommerce and be adopted by Ugandans and Africans at large, clear rules are required, along with some kind of governmental acceptance. This might be formal acceptance of Bitcoin as a form of legal tender or as a formally recognized form of currency that can be used in trading.

Kenneth Muhangi

LLB (Hons) LLM (Wales) Dip Lp LDC

Managing Partner

Signum Advocates

Intellectual property, ICT Law & international commercial Law practitioner

 

The Poor African Story

The Poor African Story

Darwin, the great naturalist proposed that in nature the strong will always prevail over the weak. Now, in his defense it has been argued that when he proposed the said theory, he meant it in relation to nature and evolution. Eons later this theory has been modified to fit into the social and economic perspective. We now know understand this theory to mean “survival of the fittest” and it is from this theory that most of the horrifying tales of our history take shape. Slavery takes the forefront as the earliest form of global social domination in relation to survival of the fittest. The justification for Slavery was that the black population was the inferior race and as such was not fit for anything else but to toil under the hand of the white supremacists. When finally the Caucasian population decided to grow a conscience, time saw a new application of this theory. “Cleansing” based on ethnic, religious and cultural grounds started to take shape. This was so effective that in Tasmania for example, a whole race of Tasmanian Aboriginals went extinct in the 19th century. In the same time line, Germany in the early 1900’s started an exercise where family lines were considered important and as such, citizens of Germany who had “imperfections” like alcoholism, epilepsy and blindness among others would be sterilized so that such genes could not be passed on to the future generation. Adolf Hitler took it a step further and with the help of the Gestapo decided that the Jews were an impure race and needed to be expunged. Ironically, the Jews share the same sentiments about their neighbors the Palestinians. Such extremism has taken root in other countries like Rwanda, Australia, Turkey, Russia and more recently Sudan. Social domination by those considered strong has resulted into catastrophic consequences for those considered “weak”. Putting aside the obvious implications that have resulted from slavery and genocide, I find it necessary to look at the “lesser evils”. The first being education. Nelson Mandela once said “Education is the greatest weapon you can use to change the world”. With all due respect, what Mr. Mandela did not realize is in what way education can be used to change the world. It is a perplexing thought to fathom why most of the countries colonized by the British still live in debt and poverty and yet, Britain continues to prosper. This confusion stems from the observation that at the time of colonization, the same curriculum in Britain was the one transported to colonies lock, stock and barrel. The NRM government must be applauded for the commendable emphasis and subsequent improvement of the literacy rates in Uganda. However, the current curriculum is still less practical and this has in turn caused educational stagnation. Those few that have broken free from their limitations have in turn become the modern day slavers and caused the continuance of this treacherous cycle. Creativity is a rare characterization so much so that even with a university degree, one will only seek to look for a job rather than create one. We can only speculate as to what could have happened along the way. Did the “stronger” colonialist learn to adapt and changed their education system to make it more practical and not tell their former colonies? I am as baffled as you are. Education has changed the world only as far as the media has portrayed it to be. However, it would be erroneous of me to attribute lack of growth in third world countries solely to the lack of quality education. Countries like Japan, China, Singapore and even Botswana have managed to overcome and adapted to reach where they are now. So such success stories seem to suggest that strength isn’t in the physical but in relation who is best suited to adapt and out maneuver. Chimamanda Adichie, has shared her thoughts on a wide world phenomenon she terms as having a single story which relates to stereotypes. The stories written about African countries for example are those of war and abject poverty. It amazed me while pursuing my LLM in Wales, that in my interaction with Welsh nationals, it always came as a surprise to them that I was eloquent in my diction. Such stereo typing according to Adichie, cannot be blamed on an individual but rather on the information that individual has been exposed to. Adichie believes that the more you write about something, the more that something becomes a reality. Education in most African countries today is such that it does not seek to develop the individual but rather to enslave him to his stereotype. It is interesting that while I was in school, the triumphs of people like Napoleon and Stalin were taught with such imagination and oomph but the toils of the Mau Mau in Kenya or Kabalega in Uganda and other great men of their time are portrayed less colorfully than their European counterparts. It is unfortunate that a Ugandan scholar should learn about Napoleon and French history and a French scholar will not be schooled on the Kabalega defiance or even the NRA liberation war. It is high time we chose what story we would like to be associated with.

Muhangi Kenneth

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Defamation in the Age of the Internet

The Internet represents a communications revolution. It makes instantaneous global communication available cheaply to anyone with a computer and an Internet connection ... the Internet is also potentially a medium of virtually limitless international defamation. Barrick Gold Corporation v. Lopehandia, 2004 CanLII 12938 (Ont. C.A.), (2005) 71 O.R. (3d) 416 (C.A.)

Since it’s launch in February of 2004, Facebook (the most popular social networking site) has grown to over 500 million active users. If Facebook was a nation, it would be the world’s third most populous.

In this “nation”, a reputation can be destroyed in an instant through a drunken post, an anonymous email or a “trigger-happy” Tweet.

Since time immemorial, a person’s reputation has always been regarded as a pivotal commodity that could determine the person’s success in life. Laws on defamation have since the days of the Magna carta evolved to protect reputations whilst keeping up with the changing times.

Nevertheless, people are exceptionally adept at discovering new ways to defame one another. This is aggravated by the nature of the Internet where communication is immediate & transcends borders.

In Canada, the Supreme Court in the recent case of Grant v. Torstar, extended the need for “responsible communication on matters of public interest” to defamation not just to journalists, but to bloggers and online posters. This means that online archives of news stories or articles, must be changed to reflect new developments.

The Court of Appeal re-affirmed this position in the recent English case of Flood v. Times Newspapers Ltd. In that case, a police officer was accused, in a newspaper article, of taking bribes from Russian exiles with criminal connections. The article was printed in the paper edition of the Sunday Times, and was also made available in its entirety online. Approximately a year after the article was first published, a report cleared the police officer of any wrongdoing. and held that online archive of a story must be updated to take account of exculpatory developments.

The liability of the Internet Service Provider

In the UK, the Court has imposed a “notice-and- takedown” requirement on ISPs to remove defamatory content once they receive notice of it.

In Godfrey v. Demon Internet Limited,  the English Court of Queen’s Bench found the host of a bulletin board service liable for failing to remove defamatory postings once they were made aware of the content.

In 2015, the European Court of Human Rights (ECHR) in Grand Chamber Case of Delfi v Estonia, departed from the “notice and take down requirement” when it held that an Estonian news site (Delfi) could be held responsible for anonymous and allegedly defamatory comments from its readers even after the information had been taken down.

In the US, the protection afforded ISPs is even broader. Section 230 of the Communications Decency Act provides statutory immunity for online services, including blogs, forums and ISPs, who publish defamatory content, so long as that content is authored by a third party. This immunity applies even if the ISP receives notice of the defamatory material.

The cloak of online anonymity

Whenever seemingly libelous content is posted on blog or a website, the perpetrators (who are often anonymous) are shielded by the right to privacy and freedom of speech. However, some of the victims of the defamation have valiantly fought to expose these cyber vigilantes.

In January of 2009, a fashion model instituted proceedings in the Supreme Court of New York to seeking to compel Google to disclose the identity of the author who had started a Google-hosted website describing her in disparaging and allegedly defamatory terms.

The “Anonymous Blogger,” as she was referred to in the action, was notified by Google of the proceedings and filed a brief in opposition to the application. In her brief, the Anonymous Blogger (through counsel) argued that the Internet has “evolved as the modern day soapbox for one’s personal opinion” and that “blogs have become a phenomenon, providing an excessively popular medium not only for conveying ideas, but also for mere venting purposes, affording the less outspoken a protected forum for voicing gripes, levelling invectives, and ranting about anything at all.”

In granting the application for disclosure, the court noted that the anonymous nature of the internet must be measured against the protection of reputation.

The court further opined that protection of the right to communicate anonymously must be balanced against the need to assure that those persons who choose to abuse the opportunities presented by this medium can be made to answer for such transgressions.

Before turning to the courts to compel disclosure of identifying information of online publishers, as a first step one should always write to the ISP, website or email provider requesting that they disclose the identifying information.

Although the ISPs will not disclose the requested information without a court order, asking the ISP is a necessary step toward obtaining the court order. The courts will be exceedingly reluctant to grant a disclosure order without other avenues of potential disclosure being exhausted, further, the ISP may be willing to confirm or deny the existence of the requested information. While asking won’t result in the requested information being granted, it will make the next steps significantly easier.

In the UK case ofNorwich Pharmacal Co. v. Commissioners of Customs & Excise, [1974] A.C. 133 (H.L.). the House of Lords held that where a person becomes involved in the tortious acts of others, even innocently, that person has a duty to give full information to the injured party, by way of discovery, to disclose the identity of the wrongdoer.

This case was re-affirmed in the 2009 Ontario case of York University v. Bell Canada Enterprises, where York University sought a Norwich Pharmacal order compelling Internet service providers to disclose the identity of the anonymous author of allegedly defamatory emails and web postings that accused York University’s president of fraud.

In granting the application for disclosure, court examined the role of the anonymous author(s) privacy expectations as they related to the interests of justice.

In conclusion, perpetrators of online defamation can be brought to book; soon, the cloak of immunity for ISP’s (in the US) may eventually be stripped from them as the law on defamation continues to evolve.

Kenneth Muhangi

Advocate

Intellectual property, Media law & international commercial Law practitioner.