The Reserve Bank of Zimbabwe (RBZ) has tightened its stance on cryptocurrencies amid fears it will struggle to control the value of cryptos used by the population and failure to protect vulnerable consumers, Business Times can report.
RBZ director of economic research and policy, Nebson Mupunga, said it will be “catastrophic” for the central bank to authorise the use of cryptocurrencies which he described as speculative and “risky” investment assets and not a currency.
The RBZ also fears that consumers will be ripped off by the players in the crypto market.
Unlike fiat money, Mupunga said, the other problem was that cryptos were not backed.
However, cryptos have already found their way into mainstream payment systems around the world with some international companies accepting some cryptos as currency.
The RBZ concerns also come at time when there is a sudden rise of cryptocurrencies usage, although players are operating underground.
Amid growing fear, the RBZ is developing its own digital currency, the central bank digital currency (CBDC).
The RBZ digital currency, which will replace fiat money in the future, has been borrowed and will use the same technology used by cryptocurrencies.
Mupunga said the RBZ was not against the technology.
“Countries are thinking of these as assets not currencies. It’s not a currency, let’s think about it as an asset just like other assets like shares on the stock exchange, not as currency,” Mupunga said.
He added: “When these things started people thought these were actual currencies which are going to replace the central bank money. That was the thinking at that time.
But, now there is consensus, these are not currencies, these are just like assets, just like investing on the stock exchange. There is volatility that’s why you have seen some exchanges collapsing.
“It’s a good technology but crypto, by its nature, is driven by the private players.”
He said crypto had no backing and no one knows who was behind it which was risky.
Mupunga said a number of cryptocurrency outfits have collapsed leaving investors in a lurch. The collapse, he said, has jolted central banks to up consumer protection.
Mupunga said the central bank was running with the CBDC to protect investors.
“In the event of collapse, people would know where to go. So, that’s the benefit of CBDC. Just think of physical cash. CBDC is coming in to replace physical cash but in a digital form. So, all the functions that are performed by physical cash will be performed by a CBDC,” he said.
The RBZ position on cryptocurrency contrasts with industry which is pushing the central bank to regulate cryptocurrencies exchanges.
Zimbabwe, which is battling serious currency and liquidity woes, will not be the first country to regulate crypto exchanges as several countries around the world have formally regulated them. Under the regulatory framework, cryptocurrencies exchanges facilitating the conversion of crypto assets into fiat currency or vise-versa are registered by the central banks.
Captains of industry said the RBZ needed to regulate cryptocurrencies and not ban them.
“We want to see a solution that develops businesses. We have reports that pensioners have lost money. We are currently sitting on a judgement, which is talking to a loss even within the regulated environment. Is there no space for the RBZ to suspend its regulatory appetite and explore potential opportunities that can accrue from this,” said Oswell Binha, CEO Africa Roundtable chairman.
Victor Mapunga the CEO of FlexFinTx, said Zimbabwe should have its own local (cryptocurrencies) exchanges monitored and regulated by RBZ.
FlexFinTx are the creators of digital wallet FlexID, which is a digital wallet which aims to unlock access to financial, insurance, healthcare and government services.
“What’s happening right now is that many Zimbabweans are registered in other jurisdictions operating cryptocurrencies,” Mapunga said.
He added: “It’s an issue of trust (of local currency). When that trust starts to have cracks, it starts to create cracks in an economy.
“The reality is that whatever monetary policy is implemented by the government, it is private citizens who have a choice and decisions to make whether or not to accept the utility of money.”
Respect Vudzijena, a lecturer at Harare Institute of Technology commissioned an academic research on cryptos.
The research, he said, proved that the “future of money was cryptocurrencies”.
“Some were saying the cryptocurrency value of a cryptocurrency is a restriction. Then we are saying the future of money is cryptocurrency, should we just sit down and ignore that? We say no, let’s go into detail and see what are really the concerns of the regulators and see what we can do about it.” BusinessTimes