Reserve Bank of Zimbabwe (RBZ) director and registrar of banking institutions, Norman Mataruka, recently stated that Bitcoin was illegal and that the regulator would not allow its use in Zimbabwe.
Bitcoin is quickly becoming the crisis currency of the 21st century. Interest in Bitcoin soared in Nigeria after the country unpegged the Naira from the US dollar in June 2016, causing it to collapse 40% overnight. In Venezuela, Bitcoin has become a case study in cryptocurrency as citizens turn to Bitcoin mining in desperation amidst massive hyperinflation. And in Zimbabwe, Bitcoin is selling at nearly twice its normal value as Zimbabweans attempt to escape a decade-long “cash crisis” that has only worsened with its recent military coup.
Almost hard to believe, isn’t it? Could Bitcoin, which is notorious for its unprecedented volatility and massive price swings, actually be the most stable form of currency for millions of people suffering through economic turmoil? Time and time again, this has proven to be true.
Furthermore, Bitcoin provides the dual benefit of bypassing many countries’ strict monetary controls while avoiding the high fees of international wire transfers through traditional banks. As such, it has become an invaluable tool for people who regularly send remittances to family and friends overseas.
But like smoke before a fire, a troubled nation’s flight to Bitcoin typically precedes another development: Weakened national governments clamping down on their country’s Bitcoin usage.
In Venezuela, the government has resorted to closing Bitcoin exchanges and arresting Bitcoin miners in a bid to stem its use. To make matters worse, reports have drifted out of the country that corrupt police officers are confiscating Bitcoin mining machines and then putting them to personal use.
That cycle may now be repeating itself in Zimbabwe, where citizens are turning to Bitcoin to overcome a long-standing currency shortage within their country.
Bitcoin Is “Not Legal” in Zimbabwe
As in many other countries, Bitcoin occupies a legal gray area in Zimbabwe. Because Bitcoin is an unregulated asset there, the government merely discourages its use due to lack of any regulatory framework. The RBZ also warns citizens not to get involved in cryptocurrency, pointing out the severe risks of losing entire investments with no potential recourse from the government.
However, RBZ director and registrar of banking institutions, Norman Mataruka, recently made statements confirming that Bitcoin is “not legal” and will not be regulated in Zimbabwe.
According to an article in the Zimbabwean newspaper NewsDay Zimbabwe, Mataruka recently responded to questions regarding Bitcoins from delegates attending the Insurance Institute of Zimbabwe annual conference in Victoria Falls two weeks ago:
In terms of the Bitcoin, as far as we are concerned, it is not actually legal. In Southern Africa, what we have done as regulators, we have said that we will not allow this in our markets.
Mataruka also stated that although Zimbabwe was researching the risks associated with cryptocurrencies, they would remain illegal until a regulatory framework had been built:
Research is currently on, being undertaken to ascertain the challenges and risks associated with these particular products and until we have actually established and come up with a legal and regulatory framework for them, it will not be allowed.
It Depends Upon What the Meaning of the Word “Legal” Is
Although Bitcoin will clearly remain unregulated in Zimbabwe for the time being, it’s uncertain what impact this will have on Zimbabwe’s Bitcoin users. In a regulatory context, it is possible that “illegal” simply means it is unrecognized as legal tender by the national government as opposed to outright banned.
In a previous case, the country of Colombia was forced to clarify its stance on Bitcoin following reports in 2016 that it had been banned there. Jorge Castaño Gutiérrez, Head of the Financial Superintendency of Colombia, made the clarification that Colombia simply does not recognize cryptocurrency as a legal form of monetary exchange.
He also added that because cryptocurrencies have no value under Colombia’s capital market laws, Colombia does not recognize them as a security either. Therefore, Colombian businesses are not authorized to guard, invest, broker or manage operations related to them.
As such, it remains to be seen whether Bitcoin will simply remain in its legal gray area, or if the Zimbabwean government intends to take actual steps towards curtailing its country’s Bitcoin usage. With any luck, it will be the former and not the latter.
Do you think the Zimbabwean government is headed towards a conflict with Bitcoin? What your outlook on the future of Bitcoin’s there? Let us know in the comments below!
Images courtesy of AACB.org, Bloomberg, Reuters/Philimon Bulawayo