Zimbabwean banks banned from trading in crypto currency

The Reserve Bank of Zimbabwe has, in the interest of public trust in the financial system, banned local banks from trading in crypto currency.

The central bank issued local banks with a 60 days ultimatum for financial institutions to stop working with crypto currency exchanges.

In a circular released on Friday evening, RBZ drew "banking institutions' attention is once again drawn to the risks involved with virtual currencies and the need to ensure strict adherence to sound risk management."

As the custodians of public trust, RBZ, said has an obligation to safeguard the integrity of payment systems.

"Crypto currencies have strong linkages and interconnectedness with standard means of payments and trading applications and rely on much of the same institutional infrastructure that serves the overall financial system."

The central bank said; "financial regulators around the world have identified the dangers and risks presented by virtual currencies to financial stability which include risk of loss due to price volatility, theft or fraud, money laundering and other criminal activities.

Also, cryptocurrencies can be used to facilitate tax evasion as well as externalization of funds in violation of a country's laws, RBZ said.

As a way of safeguarding "the integrity, safety and soundness of the country's financial system, and to protect the public in general," the RBZ ordered financial institutions to "ensure that they do not use, trade, hold and/or transact in any way in virtual currencies."

Banks are also required to "ensure that they do not provide banking services to facilitate any person or entity in dealing with or settling virtual currencies; and also that they "exit any existing relationships with virtual currency exchanges within sixty days of the date of the circular and proceed to liquidate and restitute existing account balances."

Local banks have been prohibited from maintaining accounts, registering, trading, clearing, collateral arrangements, remittances, payment and settlement accounts, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase or sale of virtual currencies.

Major crypto currency exchanges facilitating the trade of virtual currencies in Zimbabwe are Bitfinance (Private) Limited (Golix) and Styx24.

Golix has gone further to set up an ATM machine through which cryptocurrency transactions are facilitated.