Zimbabwe’s Reserve Bank governor, John Mangudya has announced that the Central Bank is not licensed to trade in virtual currency and that anyone investing or trading virtual currencies is not protected by the law.
Cryptocurrency has become the alternative currency of choice for many Zimbabweans and although unregulated by banks, it gives them the reliability that the faltering currency cannot. The sentiment amongst Zimbabweans is that converting their money into a cryptocurrency is a far safer bet than relying on what has been a fluctuating currency, not to mention the transactional limits imposed due to a lack of literal currency or diminished value of cash reserves in the country.
The country has not licensed the trading of cryptocurrency and Reserve Bank governor John Mangudya was adamant that besides the licensing of the currency, it also risks becoming an avenue of criminal activity. He was quoted saying, “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 makes them the currency of choice for money launderers and other criminals.”
The ripple effect of this decision will be welcome to crypto traders like Golix who will look to boost their peer-to-peer trading services as well as cornering the market in its current climate. As reported by WeeTracker in April, Golix has begun its expansion outside of Zimbabwe and this news will only serve to bolster their resolve.
Zimbabwe is not the only government to stop financial institutions from serving the crypto market, in the last fortnight India also banned banks in the country from servicing cryptocurrency traders. And similarly, experts believe that this news will only serve to drive people towards cryptocurrency trading platforms. “There is a positive sentiment in the industry that the government will not ban trading in cryptocurrencies, and even if formal banking channels cannot be used, people can move to crypto-crypto trading platforms,” said Shivam Thakral, Chief Executive of BuyUcoin, a cryptocurrency exchange.
Nevertheless, unlike fiat currency, the value of cryptocurrency is built on people’s beliefs and therefore it will be interesting to see how the Zimbabwean market reacts to this announcement.