The Reserve Bank of Zimbabwe has banned financial institutions in the country from processing cryptocurrency transactions for cryptocurrency traders and investors despite growing interest in digital monetary assets in the country. “In order to safeguard the integrity, safety, and soundness of the country’s financial system,…
The Reserve Bank of Zimbabwe has banned financial institutions in the country from processing cryptocurrency transactions for cryptocurrency traders and investors despite growing interest in digital monetary assets in the country.
“In order to safeguard the integrity, safety, and soundness of the country’s financial system, and to protect the public in general, all financial institutions are hereby required to ensure that they do not use, trade, hold and/or transact in any way in virtual currencies,” the Zimbabwean central bank said in a circular to banks on Friday.
The decision has sparked debate in Zimbabwe over the central bank’s heavy-handedness in regulating cryptocurrencies in the country, which has for long struggled for foreign currency and liquidity amid cash shortages at the banks.
In December 2017, the Apex Bank said in a circular to banks that it was risky to trade in bitcoin and other cryptocurrencies.
From the circular:
“As monetary authorities, the Reserve Bank of Zimbabwe 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.”
Golix is the biggest cryptocurrency exchange platform in Zimbabwe, and it also hosts a bitcoin ATM at its Harare offices. Officials at Golix say bitcoin trade is growing in Zimbabwe as it helps plug financial shortages in the country.
Although Golix is the most popular exchange platform for cryptocurrencies in Zimbabwe, the central bank has identified other exchanges such as Styx24.
The decision by the Zimbabwean central bank to prohibit banks from facilitating trade in cryptocurrencies, it said, stems from other “financial regulators around the world (who) 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 externalization of funds in violation of a country’s laws,” the bank said.
This is in stark contrast to South Africa, which said this year it intended to tax cryptocurrencies.
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Last modified: January 24, 2020 11:08 PM UTC