'Cryptocurrencies can list on Victoria Falls Stock Exchange'

The Zimbabwe Stock Exchange (ZSE) has said cryptocurrencies can list on its foreign currency-only bourse subject to regulatory approval.

If the cryptocurrencies-a digital representation of value, that can be digitally traded and functions as a medium of exchange, unit of account and a store of value but does not have legal tender status-are allowed to trade, it will be a major volte face by authorities which had seen them as an attack on the integrity and soundness of the financial sector.

"As part of our long term strategy the ZSE is open for bitcoin and cryptocurrencies to be listed on the bourse subject to regulatory approvals.

We think though that VFEX will be a better platform for this," ZSE chief executive officer Justin Bgoni told Business Times this week.

Bitcoin the most popular cryptocurrency traded in Zimbabwe. ZSE is pushing for a forex bourse, Victoria Falls Stock Exchange (VFEX), which is set to begin trading soon initially with three fungible counters- PPC, Old Mutual and Seed Co International.

The trio was told to exit ZSE after an investigation noted that the implied exchange rates were being derived from the comparison of dual-listed shares prices on ZSE and other exchanges and such implied rates were believed to be one of the leading indicators of speculative parallel foreign exchange rates in Zimbabwe.

The bourse told the dual-listed counters that it would set up a foreign currency bourse where the dual-listed firms would trade in United States dollars to eliminate the calculation of implied exchange rates.

VFEX has already obtained exchange control approval to trade in United States dollar and a number of sponsors have shown interest in the bourse.

Government sees VFEX as a platform to raise funding for local firms.

But critics say the repatriation of capital gains and dividends will be the litmus test for the exchange amid concerns over the settlement of transactions for offshore investors.

Companies listed on ZSE such as BAT Zimbabwe and Delta Corporation have been struggling to remit dividends to foreign shareholders arising from the foreign currency squeeze.

Cryptocurrencies have not found currency among regulators worldwide accused of eroding state sovereignty in monetary policy.

Last month, five EU countries -Germany, France, Italy, Spain and the Netherlands-called on the European Commission to draw up strict regulation for asset-backed cryptocurrencies to protect consumers.

Critics say virtual currencies are not only unregulated but are also neither issued by public authority nor guaranteed by the State.

As such, they are not in any way attached to notes and coins circulating in the country.

Virtual currencies do not have legal tender status in Zimbabwe or in any jurisdiction in the world.

Virtual currencies are attractive to money launderers and other criminals because of the supposed anonymity and ease with which transactions can be conducted, on the internet and across borders.

Reuters reported last year that losses from digital currency crime more than doubled to US$4.4bn in the nine months to September, from US$1.7bn in the whole of 2018.

Zimbabwe's monetary authorities have in the past warned individuals against trading in cryptocurrencies saying they presents risks such as money laundering, terrorism financing, tax evasion and fraud as they are not regulated by the country's laws.

In 2018, the central bank banned cryptocurrencies exchange firm, Bitfinance (Private) Limited, from operating saying it was not licensed by monetary authorities.

RBZ ordered all financial institutions in the country to immediately stop trading or transacting in cryptocurrencies.

It said it had taken such measures to protect the public and safeguard the integrity, safety and soundness of the country's financial system.

Bitfinance approached the courts and High Court judge Justice Alfas Chitakunye lifted the ban imposed by the Reserve Bank of Zimbabwe.