Zimbabwe pioneer institution for currencies, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has favored the central bank’s decision to ban cryptocurrency transactions. It has also accused a local dealer of some illegal activities such as exposing the country, money-laundering, evasion of foreign currency exchange controls and violation terrorism financing.
Golix fitting the battle
Golix, the trade name of Bitfinance (Pvt) Ltd, one of the two cryptocurrency exchanges in the country, has been in the forefront of the fight which it has waged against RBZ ban at the High Court for the survival of businesses supporting cryptocurrency in the Southern African nation.
This battle reached the high court when RBZ, in a statement on May 14, 2018, said that the central bank had not licensed anyone to trade in virtual currencies and that dealers and investors did not have the protection of the law.
The governor of the RBZ was quoted then
“The Reserve Bank has directed all banking institutions not to provide banking services to facilitate any person or entity in dealing with or settling virtual currencies,”
“The nature of cryptocurrency transactions make them the currency of choice for money launderers and other criminals.”
In reply to it, Golix took Reserve Bank Of Zimbabwe to high court challenging its directive after it was forced to shelve its token sale, which was scheduled to start on May 14. and was asked to cease operations by the central bank. It had presented the High court with three arguments on why the ban of cryptocurrency in the country is not just stating the ban to be unconstitutional.
Reserve bank of Zimbabwe replies
In their opposing affidavits filed on June 8, the RBZ and Mangudya argued that the Bitfinance system, which they said was not regulated and illegal. It also said that there could be possibilities that it could be abused by criminals to conduct illicit transactions with no chance of tracking them.
Mangudya said the decision to initially ban cryptocurrency transactions and exchange operations of Golix in the country was governed by the Banking Act of Zimbabwe, which gives the central bank the powers to supervise banks and prescribes a variety of supervisory actions that the bank may take as a measure to correct any conduct that may be a threat to the smooth operation of the banking and financial sectors.
The Governor of RBZ was quoted saying
“It is as a result that the bank (RBZ) directed banks not to deal with the applicant (Bitfinance (Pvt) Ltd) as the latter’s activities were not only unregulated and illegal, but presented all kinds of risk, including but not limited to fraud, money-laundering, evasion of the country’s exchange.
While the High Court of Zimbabwe is still to announce its decision on the fate of the case between Golix and RBZ, the move by Zimbabwe’s central bank to ban cryptocurrencies gives us a clear hint of how most African states are yet to embrace digital currencies.
Will cryptocurrency be a boon for a country like Zimbabwe whose Monetary policy has acted as a poison for the country, with inflation at peak or will the money regulator have the last laugh? Do let us know your view on the same.
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.