No surprise really, I was expecting the Reserve Bank of Zimbabwe to be challenged in court for their directive that effectively banned cryptocurrency in Zimbabwe. The central bank did not just instruct banks to stop facilitating any cryptocurrency linked transactions but they also directed the general public to stay away from cryptos. Now, it has emerged they wrote Golix and possibly other cryptocurrency startups telling them to wind up. Golix has had some of its bank accounts closed.
Such pronouncements attract legal fights and we have one at our hands now. Golix’s challenge is on three arguments:
Does the RBZ have legal authority to ban cryptos?
The first argument that Golix is putting forward is to ask whether the central bank has authority to declare cryptos illegal. They build up their case by explaining how they have met the RBZ several times including one day before the RBZ released the ‘infamous’ circula and four days before the RBZ wrote Golix directly.
Golix argues that the Reserve Bank has no jurisdiction over Golix and that they have never acted as if they had in all their dealings.
The crux of their argument is perhaps summarised by this paragraph from their urgent chamber application before the High Court:
I submit that the ban in effect outlaws and classifies as illegal Applicant’s operations.
The Respondents are in fact purporting to classify the trade in cryptocurrency as illegal.
That will amount to law making, a function that belongs to the legislature and not the
Respondents. Respondents are thus clandestinely usurping Parliament’s law making
Applicant refers to Golix and Respondent to the RBZ and Dr John Mangudya is the second respondent.
I don’t know about the legal authority of the RBZ and the court will make a ruling on that one. However, I question the moral authority of the central bank to act as they said as ‘custodians of public trust.’ The contrast is true: Golix rose and became a household name because it solved the problem of value exchange after the creation of the bond note and worse RTGS money by the Reserve Bank of Zimbabwe.
Ban is not fair according to the legal principle of administrative justice
The second argument by Golix is that the RBZ did not give reasonable notice and right of response when they issued their directives which they argue means a breach of Administrative Justice since the RBZ is founded by statute as an administrative body.
This block quote best summarises the argument:
Applicant was never advised prior to the ban that it will be implemented even though
Respondents had ample opportunity to advise Applicant of same. As aforesaid, the last
meeting between the parties was held on 11 May 2018. Four officials from the Applicant
including myself attended the meeting while fifteen officers, including the Registrar of
Banking Institutions represented the Respondents. In that meeting, the discussions were
more of Respondents wanting to learn and understand the technology behind our
business and our business model.
The impression we got was that Respondents wanted to understand in order to begin
working on regulation. No mention was made of any impending ban on our business.
The purpose of the ban was also not explained to us in advance. The letter sent to us
advising of the ban does not explain the purpose of the ban either. It only advises of the
ban. We can only speculate as to why we were banned.
In the absence of any warning about the ban, its purpose or the reasons behind it,
Applicant cannot regulate its conduct appropriately in order to comply with any
requirements. Applicant does not know what it needs to do in order for the ban to be
reversed. Applicant could also not regulate its affairs in advance in order to prevent the
ban by addressing the reasons for which it was being imposed.
The sudden and immediate nature of the ban is seriously and irreparably prejudicing
Applicant’s business for as long as the ban remains in place. Applicant was caught
unaware. With respect, the nature of the ban suggests malice and bad faith on
Respondents’ part. One is left with a feeling that Applicant was deliberately not advised
of the ban so as to maximise the damaging impact of the ban on Applicant.
Golix further argues:
I should point out that Respondents’ failure to advise of any right of appeal or review
also suggests strongly that Respondents do not yet have the power to regulate the
Applicant. I am advised that whenever an administrative authority makes a decision, it
is customary that the decision is accompanied by an indication of any right of appeal or
review against the decision. The absence of a clear right of recourse in this case clearly
shows that there is not yet a clear framework empowering Respondents to issue a ban
such as it issued.
The ban is unconstitutional
The third argument put forward by Golix is that the RBZ acted unconstitutionally. They site section 68 of the constitution:
Section 68 of the Constitution requires that administrative action be lawful, reasonable,
proportionate and procedurally fair. I humbly submit that Respondents’ actions fell
short of the standard required in the Constitution
The reasons they give for their position that section 68 of the constitution was violated by the central is summarised in this quote:
I should explain why Applicant contends that the decision is disproportionate in the
circumstances. First, the press statement issued by 1st Respondent does not state the
purpose for which the ban was imposed. The reason why it was necessary to impose the
ban is not stated in the press statement. We can only speculate as to why the ban was
In the absence of a clear reason for the imposition of the ban, it is really difficult to assess
the proportionality of 1st Respondent’s decision vis-a –vis the goal it was intended to
achieve. Nonetheless, even in the absence of a clear reason for the ban, it is not difficult
to see that the decision is disproportionate.
The rest of the document supposes the possible fears that the RBZ may have had and responds to those fears as well as proposes what Golix obviously deems would have been a more reasonable response which of course includes the issuance of regulatory sandbox license as I have been advocating here.
Is this another Kwese drama in the making? As the professor would say: handei tione.
Golix is a Cryptocurrencies exchange in Zimbabwe. Golix was founded in December 2014 and was initially called BitFinance while their exchange was called Bitcoin Fundi. The company was founded by Tawanda Kembo and Verengai Mabika. In May 2018, Golix was ordered to shut down operations... Read More About Golix
The Reserve Bank of Zimbabwe (RBZ) is the central bank of Zimbabwe. Its offices are located at number 80 Samora Machel Avenue in Harare. The Reserve Bank of Zimbabwe operates under the Reserve Bank of Zimbabwe Act, Chapter 22: 15 of 1964. The Act provides... Read More About RBZ
John Panonetsa Mangudya is an economist and the current Reserve Bank of Zimbabwe governor. Mangudya, who sits on many local and international boards .He was made RBZ governor after the expiry of Gideon Gono's term in 2014. He had been CBZ Holdings Ltd Chief Executive... Read More About John Mangudya