According to a circular labeled No. 2/2018 issued on 11th May this year, the RBZ instructs all cryptocurrency businesses to wind up their operations within two months before the ban becomes effective. The reserve bank points out that the measure is necessary to protect the public from activities such as fraud, money laundering, and price violations to ensure the integrity and soundness of the country’s financial system. The move is also set to mitigate the risks that come about due to trading in cryptocurrencies.
According to the circular, some of the cryptocurrency trading activities that are termed as illegal include opening accounts in exchanges that deal with cryptocurrencies, accepting cryptocurrencies as collateral and receipt of money in accounts that relate to buying and selling of cryptocurrencies.
The Zimbabwean financial authority had earlier in November 2015 and December 2017 raised concerns over trading in virtual currencies issuing circulars in both instances that warned about the trade of cryptocurrencies in the country. The bank feels that the management of financial institutions should have sound management and according to the reserve bank, the crypto market does not have this kind of management.
Losses To Exchanges
This ban is expected to negatively affect the exchanges that had set up shop in Zimbabwe. For instance, Golix is the biggest exchange in the country and had put up ATMs in different parts of the country. It has operated in the country for three years and has more than 50,000 customers.
Despite the ban by RBZ, the exchange is still soldiering on. On 11th May it announced the launch of its new token the GLX token. The tokens Initial Coin Offering (ICO) is currently underway and it is set to end on 6th July 2018. The exchange hopes to raise funds during the public sale that will be used to expand the exchange operations to other countries in Africa and to expand the portfolio of services the exchange offers. Other exchanges that will face possible losses include Bitfinance and Styx24.
Despite the ban, individuals can still choose to transfer cryptocurrencies amongst themselves. After all one characteristic of cryptocurrencies is that they allow for peer-to-peer transactions without the need for intermediaries.
Those who trade in cryptocurrencies in the Southern African country prefer this method as it offers rare protection from loss of value. This is because their deposits made in fiat currency in the country financial institutions lose value quickly. Other traders of virtual currencies use the digital coins to fund their family members who are abroad and to buy goods online.
The rise in the price of virtual currencies such as Bitcoin at the end of 2017 saw an increase in the trading volumes of cryptocurrencies as traders scrambled to make some profit. The result was that many countries came up with regulatory measures to control the market and others banned the trading altogether. China is one such example. Just like Zimbabwe, China shut down local cryptocurrency trading exchanges in the country.