Zimbabwe has entered an exciting digital financial world of Virtual Cryptocurrencies in a not so understood paradigm shift widely driving cashless settlements and payments globally, whose evolution and fast-growing inter-exchange settlement nature and steady uptake amongst millennials has defied the legality or legitimacy, volatility, reliability, scalability and security issues, demands serious interrogation and discourse.
The fast uptake of the Cryptocurrencies technology is riding on the back of technological and financial trends that are facilitating the proliferation of decentralized exciting cashless payments and settlements platforms and systems today: runaway inflation, crippling cash shortages, a fast crumpling economy and political system, ubiquitous Internet connectivity, low-cost computing and storage, and the upscaling and development of the blockchain technology by young Zimbabweans.
Money, by nature is sensitive, and cryptocurrency payment system requires multi-layer decentralization to ensure that no single party controls the implementation of the system and the flow of money during daily operations. The governance of the cryptocurrency payment system should also be decentralized to prevent a single party from modifying system parameters and algorithms in their favor.
According to ethereumworldnews.com, “Bitcoin has spiked to the highest mark this year so far, continuing the bullish trend that has doubled BTC quotes since the start of the spring as the new weeks begins, Bitcoin price soaring 10%” in the process.
Delivering the new cashless money and the obtaining endless possibilities they bring, are of great interest to Zimbabweans at the moment as the country is faced with a plethora of macro-economic challenges threatening to grind the economy to a holt.
Given the depth of the challenges the country is facing it is tempting and widely expected that Zimbabwe develops and adopts a different, compelling and highly-scalable and fully-decentralized payment system that is largely divorced from the failing paper based system that has been the source of the country’s many problems.
Bitcoin has achieved high levels of decentralization compared to centralized money supplies, and remarkable levels of awareness for cryptocurrencies, although merchant adoption has been nearly non-existent. Bitcoin’s architectural choices have constrained both performance and scalability, issues limiting its utility as an everyday payment and settlement unit, raising questions on the intrinsic value of both Bitcoin and digital currencies in general.
The Cryptocurrencies payment systems option for Zimbabwe inherently exhibits a number of desirable properties:
1. Global consistency and transparency.
2. Ubiquitous, global, and fully-decentralized.
3. Secure: preventing unauthorized or invalid payments from being executed.
4. Latency: affording seamlessly transactions, on the timescale of seconds.
5. Throughput: The network as a whole should be able to confirm up to thousands of transactions per second.
6. Usability: round the clock accessibility seamless and predictable user experience.
7. Privacy: preventing unauthorized access, and unpredicted loss of assets and the transaction logs.
Bitcoin is the most popular cryptocurrency in Zimbabwe and according to the website www.bitcoin.hosting, “Bitcoin is the first open-source, decentralized and most popular Cryptocurrency with a market cap of over many billion US dollars. Bitcoin mining is the process of confirming transactions on the Bitcoin network and earning rewards. It’s the process by which new Bitcoins are found on the network and brought into circulation.”
Zimbabweans are used to currency volatility and cryptocurrencies have not been spared. According to globalcoinreport.com, “Bitcoin continues to remain volatile and struggles with waves of growth and decline, there are some altcoins that are not following its path. Of course, most of them are performing in pretty much the same manner as BTC, as they always had. But, a few coins have actually managed to outperform Bitcoin in recent months.”
The coming of the Cryptocurrencies craze into Zimbabwe promising to introduce fast and secure transactions and bring to an end the Reserve Bank of Zimbabwe (RBZ) culture and propensity on printing money. This was met with varied opinions and fears and skepticism given the past bank failures where many people lost a lot of money in the past bank failures, due to rising inflation, criminality, corruption and speculation.
The Reserve Bank of Zimbabwe (RBZ) quickly banned any cryptocurrency trading, but failed to kill the cryptocurrency craze that has hit the globe.
In a statement the Central Bank had tried to argue that, “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 with standard means of payments and trading applications and rely on much of the same institutional infrastructure that serves the overall financial system.” This is despite the fact the same central bank has failed the nation on several occasions and that the people nolonger trust the entire Zimbabwean banking sector.
Banning the cryptocurrencies, Reserve Bank of Zimbabwe governor Dr. John Mangudya, 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, adding that, the all banking institutions not to provide banking services to facilitate any person or entity in dealing with or settling virtual currencies” further reiterating that, “virtual currencies or cryptocurrencies such as Bitcoin and Litecoin do not have legal tender status as they are neither issued by the Reserve Bank nor guaranteed by the government.”
Dr. Mangudya said, “The Reserve Bank of Zimbabwe has not authorised or licensed any person or entity or exchange for the issuance, sale, purchase, exchange or investment in any virtual currencies/coins/tokens in Zimbabwe. Exchanges such as Bitfinance (Private) Limited (Golix) and Styx24 are not licensed or regulated by the Reserve Bank.”
However, the High Court has lifted ban of cryptocurrency trading in Zimbabwe after a successful application by Bitfinance (Private) Limited, the operators of Golix, whose operations had been banned by the central bank.
The central bank said that “accepting cryptocurrencies as collateral, opening accounts of exchanges dealing with them and transfer or receipt of money in accounts relating to purchase or sale of virtual currencies were all prohibited.”
The High Court ruling puts to rest the legality issues of cryptocurrency trading in Zimbabwe for now.
Professor Ncube challenged the Reserve Bank of Zimbabwe (RBZ) to “invest in and understand cryptocurrencies”, or digital currencies that leverage complex encryption technologies used to regulate the generation of units of currency; the transfer of funds, trading, operating independently of a central bank.
Zimbabwe and Africa should learn from the Swiss experience where the country imposed a registration process on cryptocurrency exchanges requiring them to obtain licenses from the Swiss Financial Market Supervisory Authority in order to operate. Zimbabwe should standardize and regulate cryptocurrencies and come up with a set of regulations and guidelines, top address institutional and users concerns from banking to securities trading and collective investment schemes in the country and secure tax earn in the process.
Another Zimbabwean startup developed an exchange platform Cryptogem Global, crypto-exchange that was expanded into an international cryptocurrency trading platform.
Zimbabweans that have mastered the art of mining cryptocurrencies and online forex trading are paying taxes on externally registered exchange platforms of which the government can put their hands into.
Cryptocurrencies can be used to substitute foreign currency in importing necessary raw materials including importation of vehicles, equipment, medication or payment for services. Zimbabweans in the United Kingdom are reportedly making thousands of pounds by investing in Leocoin, which is part of the cryptocurrency family.
Another startup, Zulu Republic recently announced that users can now send and receive Bitcoin and Litecoin on WhatsApp, via Lite.IM through link https://t.co/JaldSafGBK. Lite.IM is a conversational crypto wallet based on WhatsApp, which allows users to send and receive cryptocurrencies. that WhatsApp users, who have tokens can interact with the Lite.IM business account on WhatsApp to send and receive digital tokens.
Zimbabweans are now spoiled for choice as they can now Apart from Bitcoin (BTC) and Litecoin (LTC), users can also send and receive Ethereum (ETH) and Zulu Republican Token (ZRX).
A UK-based Zimbabwean Lawyer, Prosper Mwedzi, has created the first ‘tourism-focused’ cryptocurrency VicFalls Coin expected to be used by tourists who visit the Victoria Falls, in Zimbabwe and Zambia.
The VicFalls Coin, runs on an open-source blockchain platform, Waves Blockchain that allows users to launch their own custom cryptocurrency tokens. The free coins are being given away on the VicFalls Coin website with the aiming at bringing tourists to Victoria Falls, and encourage the adoption of crypto-currency in the third world.
The mass adoption of cryptocurrencies in Zimbabwe is still a few glitches away. The complexities of crypto transactions have often kept everyday people out of the game. However, the game changer may be the integration of cryptocurrencies with WhatsApp. Awareness of cryptocurrencies and their benefits is increasing among average investors, such that developing simplified tools to promote the increased uptake of the new technologies. Cryptocurrencies are pseudonymous meaning that there is a permanent trace of all activities on the platforms such that any illegal activities can be traced and corrected.
By Francis Bingandadi Managing Editor