Jeffrey Gogo —
State pension fund NSSA will consider moving money into bitcoin in the future, but will be cautious about it when it decides to do so, says board chairman Robin Vela.
“The reality is that more and more people are now moving into the digital age, looking for alternative ways of making payment other than cash,” Vela told the Business Weekly on Wednesday in a telephone interview.
“So, bitcoin and other crypto-currencies have now caught on, they’ve got a flavour to them and are being traded,” he added.
The National Social Security Authority (NSSA), a quasi-Gorvenment pension fund, held $984 million in reserves at the end of 2016, according to its latest annual report. Cash and cash equivalents, a measure of readily available money, climbed to $118 million, up 25 percent from a year ago. Vela becomes arguably the first prominent figure managing a Zimbabwean pension fund — already big investors in stocks and property — to speak openly in support of bitcoin, a subject that has split opinion here and elsewhere.
Several local institutional investors have been reluctant to invest in the virtual currency, skeptical of the asset’s stability. Another factor is that many still do not understand the underlying blockchain technology behind bitcoin. Tax collector ZIMRA has said bitcoin will be taxed, even though it doesn’t know clearly how, at present.
“We are restricted from investing in offshore markets,” Vela said, ostensibly in reference to the tendency by local investors to buy bitcoin abroad due to a lack of supply on the domestic market.
But drawing parallels with Ecocash, which struggled with acceptance and credibility in its early days, he stressed how “bitcoin is one of those things you ignore at your own peril”.
“Locally we look at all investments based on their merit, but (bitcoin) is not just a new idea that we would rush getting into bearing in mind that we are dealing with pensioners’ money,” said the NSSA chairman.
“We look at a whole host of other factors, including the team that’s involved (in creating bitcoin), their track record of delivery etc.”
On the world market, bitcoin this week reached a landmark, crossing the $10 000 threshold. The token, shy of a decade in existence, is now worth ten times as much as it cost in January, taking its total global value to over $165 billion. One of the key factors behind bitcoin’s dramatic rise this year has been the acceptance by cash-rich mutual and pension funds on Wall Street and elsewhere.
CME Group, a US marketplace trading several derivative instruments, has said it plans to set up a bitcoin futures market before the end of this year, demonstrating growing confidence in the digital currency by investors in the world’s biggest economy. Here, the absence of big, wealthy corporate or individual investors in bitcoin illustrates the suspicion with which crypto-currencies are presently viewed.
But there hasn’t been a wait for late comers. This week the local price of bitcoin on the exchange Golix.com shot 28 percent or $4 000 from a week earlier, to $18 000. In November, the price soared 50 percent, with more than $1 million worth of trades reported. Should wealthy institutional investors like pension funds and insurers start to move in, increasing demand, which is already very firm, the price will likely rise further.
Concerned about the rapid acceleration in the price of bitcoin, a technology rubbished by Chinese authorities “as lacking legal foundation”, others have started to question the sustainability of the current rally. They say bitcoin is a bubble soon to burst, a pyramid scheme, and other such shadowy initiatives. But crypto-currency enthusiasts are digging in their heels.
“I do not think it’s a bubble,” Verengai Mabika, who co-founded the local digital currency trading platform Golix.com, opined.
“Bitcoin’s value is based on demand and supply in addition to its core principles such as the deflationary characteristic,” he said, by text message.
“The number of total bitcoins to be created is known and it’s given that over time the value will go up. World financial events also add to this sudden rise: the more countries talk about blockchain and cryptos the better it is for the ecosystem.”
Mabika said “an interesting aspect” was how quickly young people were taking to digital money.
“This is an important factor stakeholders should interrogate.”
NSSA chairman Robin Vela has not spent pensioners’ money — perhaps only yet — on assets considered by some as hot air. However, he might now find himself at cross-purposes with the Reserve Bank of Zimbabwe, which recently dismissed bitcoin, refusing to register exchanges where the virtual currency is traded.
RBZ registrar of banks Norman Mataruka has said bitcoin “is actually not legal” and that “we will not allow this in our markets”.
On his part, Vela believes bitcoin only needs wider buy-in, to be accepted in shops and by those in remote areas, as a means of payment.
“I do think that for us as a country, even though we operate in a global village whose financial system has been disrupted, we still have got to ensure that crypto-currencies have got acceptance from the common lowest denominator – the rural folk, your grandmother and grandfather,” Vela told the Business Weekly.