'RBZ must regulate not ban cryptocurrencies'

Zimbabwe Information and Communication Technology Division (ZICT) and other IT experts have called on the Reserve Bank of Zimbabwe to regulate cryptocurrencies rather than banning them outright.

A cryptocurrency is a digital or virtual currency that is not issued by any central bank authority, rendering it theoretically immune to government interference or manipulation. The first cryptocurrency to capture public imagination was Bitcoin. Bitcoin's success has spawned a number of competing cryptocurrencies, such as Litecoin, Namecoin, PPCoin and Bitmari in Zimbabwe.

This comes after the RBZ said last week it had asked financial institutions not to get involved in cryptocurrency transactions for fear of possible problems from the unregulated trading. The directive was shared in a circular on virtual currencies distributed to all financial institutions last Friday.

According to the circular signed by the RBZ registrar of banking institutions Norman Mataruka, the central bank has said that it is taking these measures to protect the public and safeguard the integrity, safety, and soundness of the country's financial system.

This means banks are prohibited from investing or trading in cryptocurrency, offering cryptocurrency exchanges and creating platforms for cryptocurrency trading.

They are also banned from allowing clients to use credit cards to buy cryptocurrency, and from advising customers on investing or trading in cryptocurrency.

The central bank has said cryptocurrencies were not legal tender in Zimbabwe and it was worried that they may be used in illegal activities such as money laundering or supporting terrorism.

The ban in the use of cryptocurrencies comes only a few days after Finance and Economic Planning minister Patrick Chinamasa announced Zimbabwe's economy was now 96 percent cashless.

Under this regime, EcoCash, OneMoney, TeleCash, Zipit, bank cards, credit cards, debit cards or Internet have become more and more prevalent and have taken the place of cash transactions.

The ZICT, a division of Zimbabwe Institution of Engineering (ZIE), said this is an extremely enthusiastic idea considering that Facebook has introduced its own cryptocurrency.

"Could it be that RBZ does not understand what cryptocurrency is? RBZ should be in the forefront of these new technology currencies. As ICT professionals, we would like to remind RBZ that cryptocurrency is here to stay and the best we can do is to introduce our very own Zimbabwe cryptocurrency," Jacob Mutisi, the head of ZICT said.

"Please can RBZ advise us who they consulted considering that none of our Zimbabwe Institution of Engineers or the ICT division was consulted to provide any feedback on these modern technology developments that are taking place around the world?

"In Zimbabwe we have the best brains when it comes to Block Chain Technology (used to develop cryptocurrency) with Harare Institute of Technology leading the way. You don't need to look no further."

ZICT took exception to point number 3 on the RBZ press statement which said: "As monetary authorities, the Reserve Bank is the custodian of public trust and has an obligation to safeguard the integrity of payment systems.

"Cryptocurrencies 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."

ZICT reminded the RBZ that "they do not print any money, furthermore, the future is here, 96 percent of our transactions, we are using virtual currency which you may think you control."

The RBZ statement also 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. "Further, cryptocurrencies can be used to facilitate tax evasion as well as externalisation of funds in violation of a country's laws."

ZICT said nothing is completely secure.

"May we remind RBZ the environment we are in as Zimbabwe Information and Communication Technologies a division of Zimbabwe Institution of Engineers has identified loopholes and vulnerabilities that can completely derail Zimbabwe's cashless trajectory which we can demonstrate on your request?

"Our suggestion is for the RBZ to call for a stakeholders meeting that should include ICT professional who can clearly explain the benefits of cryptocurrency especially in our cashless Zimbabwe.

"RBZ, there is no going back on this block chain advancement we are procrastinating on something we should embrace and implement. Last but not least cryptocurrency is here to stay."

Nigel Gambanga, an expert in the new technologies, said  the stance taken by Zimbabwe's central bank is not new.

"The cryptocurrencies space is still facing a lot of scrutiny and regulators in other markets have taken a cautious approach, pushed by concerns around money laundering, tax evasion, fraud and in cases like Zimbabwe, the externalisation of foreign currency in response to the country's foreign currency challenges," Gambanga said.

"Countries like India and China have explored this route before and in Africa, Kenya's regulator has also taken a hard stance against cryptocurrencies.

"They are all meant to be measures against potential risks in a new space.

"However, such moves also have a negative impact on legal service providers including entities that solve some problems that affect the economy.

"In Zimbabwe, a number of businesses that have emerged in this space over the past few years that include the local cryptocurrency exchanges like Golix as well as outfits that have been using cryptocurrencies to facilitate remittances such as Bitmari will be affected by the directive," he said.