End of the road for Bitcoin as Zimbabwe bans banks from trade in cryptocurrencies

The central bank warned against trading in cryptocurrencies, saying virtual currencies such as bitcoin were not regulated in the country.

 

Zimbabwe Digital News

 

The Reserve Bank of Zimbabwe has issued a directive to Zimbabwean financial institutions prohibiting them from working with cryptocurrency exchanges, or holding any accounts of people trading in cryptos. The central bank has given financial institutions 60 days to end their existing relationships with crypto-currency exchanges.

The central bank warned against trading in cryptocurrencies, saying virtual currencies such as bitcoin were not regulated in the country. Bitcoin has sparked interest in Zimbabwe as the Zimbabwe dollar was abandoned in 2009 due to hyperinflation and the banking system relies on scarce US dollar banknotes.

The lack of US banknotes has left Zimbabweans queueing for hours outside banks and often unable to withdraw their cash.

Zimbabwe also has a “bond note” currency whose value is supposed to be pegged to the US currency, but which trade at a significantly lower rate in reality.

“Virtual currencies such as Bitcoin and litecoin do not have legal tender status,” John Mangudya, Zimbabwe’s central bank governor, said in a statement.

Last month Zimbabwe’s bitcoin exchange Golix enabled crypto-currency purchases and cash withdrawals from bitcoin wallets via an Automated Teller Machine (ATM).

The ATM went live amid much excitement in Harare, and traded according to the global bitcoin and ethereum average prices. World bitcoin prices averaged US$6 750 in April, while ethereum averaged US$398 on global exchanges.

Mangudya said the central bank had “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,” he added.

President Emmerson Mnangagwa has been battling to revive the ailing economy after long-time ruler Robert Mugabe was ousted last November.

Statement from Director of Bank Supervision, Norman Mataruka Registrar of Banking Institutions

Here’s the full circular, dated 11 May 2018:

CIRCULAR TO BANKING INSTITUTIONS NO. 2/2018: VIRTUAL CURRENCIES

1. Further to the Circular dated 16 November 2015 and Press Statement issued by the Reserve Bank of Zimbabwe (the Reserve Bank) on 20 December 2017 on the use of virtual currencies in Zimbabwe, banking institutions’ attention is once again drawn to the risks involved with virtual currencies and the need to ensure strict adherence to sound risk management.

2. Our investigations have revealed that the major cryptocurrency exchanges facilitating the trade of virtual currencies in Zimbabwe are Bitfinance (Private) Limited (Golix) and Styx24. Golix has gone further to set up an ATM machine through which cryptocurrency transactions are facilitated.

3. As Monetary Authorities, the Reserve Bank 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.

4. Financial regulators around the world 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.

5. 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:
a. ensure that they do not use, trade, hold and/or transact in any way in virtual currencies;
b. ensure that they do not provide banking services to facilitate any person or entity in dealing with or settling virtual currencies; and
c. exit any existing relationships with virtual currency exchanges within sixty days of the date of this Circular and proceed to liquidate and restitute existing account balances.

6. For the avoidance of doubt, banking services include maintaining accounts, registering, trading, clearing, collateral arrangements, remittances, payment and settlement accounts, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of virtual currencies.

7. Be advised accordingly.

 

Last month Zimbabwe’s bitcoin exchange Golix enabled crypto-currency purchases and cash withdrawals from bitcoin wallets via an Automated Teller Machine (ATM).

 

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