Cryptocurrency is likely to flourish under new Minister of Finance and Economic Development Mthuli Ncube, if his views carry the day.
The economics professor has spoken positively on how Zimbabwe needed to be open-minded about cryptocurrency and the distributed ledger technology that underpins them.
“I think the attitude for Zimbabwe should be to invest in understanding innovations and often central banks are too slow in investing in these technologies,” said Professor Ncube, in an opinion article published widely in the local Press a few days before President Mnangagwa confirmed his appointment on September 7.
“But there are other countries which are moving faster,” he said.
“If you look at the Swiss central bank they are investing in and understanding bitcoin. One can pay for travel using bitcoin in Switzerland. So if these countries can see value in this and where it’s headed, we should also pay attention.”
Cryptocurrencies like bitcoin, ethereum and liteoin are banned in Zimbabwe. The country had started to emerge as a critical part of the crypto market in Africa when the Reserve Bank of Zimbabwe in May shut down two exchanges — Golix and Styx24 — that were helping people buy and sell bitcoin and other digital coins from a central platform.
The RBZ accused the exchanges of violating Exchange Control laws, and of taking on banking activities, such as accepting deposits — something they weren’t allowed to do. When Golix tried to raise $32 million via a token sale in June, central bank governor John Mangudya described the process as a “pyramid scheme”. Today, Golix is contesting the ban in the High Court.
Now, whereas his predecessor Patrick Chinamasa, said cryptocurrency was not a priority, Minister Ncube, a former vice president of the African Development Bank and a revered liberal economist, sees things differently.
“I would actually encourage the central bank to create a unit to try and understand cryptocurrency,” he said.
“We have innovative youngsters so the idea shouldn’t be to stop it (bitcoin) and say don’t do this but rather the regulators should invest in catching up with them and find ways to understand it, then you regulate it because you now understand it,” the finance minister said.
Crypto to bust sanctions
Mangudya has in the past made suggestions about investigating in opportunities arising from the blockchain technology. But other financial regulators are already looking into this.
In South Africa, that country’s Reserve Bank has piloted an inter-bank settlement system code named Project Kohka, which runs on the Ethereum blockchain. Aiming to speed up payments, the system is understood to have performed “exceedingly well” during simulated trials for real-time gross settlements between banking institutions.
Like the RBZ, the South African Reserve Bank does not recognise cryptocurrencies as legal tender, urging caution in their trade. But that has not prevented the South African revenue authority from taxing profits made from cryptocurrency transactions.
In February, Regulators in Venezuela issued a digital currency of their own called the petro, which is claimed to be backed by oil, to help bust US economic sanctions.
Iran recently announced plans to legalise bitcoin mining, a process that creates new digital coins by solving complex math problems. The ultimate goal is for Iran to issue its own cryptocurrency to compensate for the expected squeeze in petrodollars arising from US economic sanctions designed to cut oil sales from the country, the economy’s lifeblood.
With its history of hyperinflation, bank failure and currency problems, Zimbabwe is often looked at within the crypto ecosystem as a fantastic use case: its currency so hyper-inflated it is now officially canned and out of circulation.
The Zimbabwean dollar has become a cautionary symbol, often employed by cryptocurrency zealots as a way to show the folly of faith in politicians controlling an economy. If there’s an upside to such a phenomenon, Zimbabweans have become practical monetary experts out of necessity.
Half of all transactions involve paper money, and for the domestic population they’ve become accustomed to exchanging US dollars, South African rand etc, a gap that cryptocurrencies could fill.
Ncube has recently spoken about wholesale currency reforms, including the abolition of the bond notes, it is a thrill we wait to see whether crypto will find space in the reforms.