Reserve Bank Acts Typically Zimbabwean: If You Don’t Understand The Technology, Fear It And Ban It

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Some years ago I founded an EdTech (educational technology) startup. We had solutions for primary and secondary schools. The solution may have been not so good or maybe it was but that was not important because the roadblocks at schools that we wanted to sell the solution ensured we could not test that out even when offered for free.

At the schools we went I would meet fellow entrepreneurs selling all kinds of stuff: t-shirts, golf shirts, report booklets and even school buses! All these guys succeeded much more than we did and they were never asked (mostly) for any letter from the ministry of education permitting them to have business with schools. The opposite was true for us: we needed a letter from the ministry to give our product for free or even to demo it.

I had a relationship with the relevant director in the ministry but they would not pen such a letter because initially they said no such letter was needed, schools had authority to buy what they needed and more so the director said they believed in our solution. Later on policy then changed and the Permanent Secretary in the ministry had to approve any business to deal with schools.

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Things got worse at that point. We failed to even get audience with the permanent secretary. I got reminded of this experience when the news broke that the Reserve Bank of Zimbabwe (RBZ) had outlawed the trading of cryptocurrencies.

How is my story similar to RBZ?

What I realised in my EdTech days was that a school head who did not understand technology (the greater number) would not want to talk to us. They would bring up letters of approval and such just to hide from having to consider something that was new to them and that made them feel ignorant. On the other hand the very few school heads who understood tech a little bit were quite keen to engage us and our sale success rate with them was above 80%.

The move by RBZ makes me feel that this lack of confidence in the face of a new technology motivates the ban more than anything else. How much has the central bank invested in understanding cryptocurrencies and the regulation challenges they pose? I would say not much because issuing a directive to ban is counter learning.

Here’s how learning would have looked like

In markets like Mauritius, authorities are issuing sandbox licences for cryptocurrency businesses. These are licences that allow the authority to learn. Typically such a licence is issued with the full understanding that this is a new technology that has no regulative precedence yet.

The licence thus gives the licencee strict rules to abide by especially rules regarding the reporting of all activities. It is the reporting bit that then allows the regulator to learn the nuances to the new technology and how to craft regulation.

In fact sandbox licenses are used widely when there is a new technology on the horizon for example self driving cars.

RBZ lost opportunity

It looks like what irked the suits in the glass building was the installation of a bitcoin ATM by Golix. The circular RBZ issued to banks specifically mentions the Golix ATM:

2. Our investigations have revealed that the major cryptocurrency exchanges facilitating the trade of virtual currencies in Zimbabwe are Bitfinance (Private) Limited (Golix) and Styx24. Golix has gone further to set up an ATM machine through which cryptocurrency transactions are facilitated.

The Golix ATM was a global sensation. Reputable global publications ran the story of a bitcoin ATM in Zimbabwe. I belong to a few Pan African WhatsApp groups on technology and people in these groups were fascinated much by the Golix ATM.

Zimbabwe was emerging a leader in the development of blockchain and cryptocurrency and modern fintech on the continent and all no thanks to the government that is open for business. We needed to leverage on that and be the fintech hub in Africa.

Actually the government contributed, they invented the problems that made us adopt the blockchain technology as a solution.

If you print something called a bond note do you have moral authority to ban cryptos?

One person in our Techzim community groups remarked that this ban was coming from the authors of hyperinflation, a cash crisis and the bond note. The Reserve Bank has caused us a lot of pain since the days of Gideon Gono and now they have the audacity to say of themselves:

As Monetary Authorities, the Reserve Bank is the custodian of public trust and has an obligation to safeguard the integrity of payment systems. 

Am not saying cryptocurrencies are necessarily good

Obviously the jury is still out on cryptocurrencies but that’s beside the point. If I choose to sell rotten tomatoes or worthless pieces of paper and somehow people want to buy them does the RBZ have authority to instruct banks not to facilitate those transactions because they don’t understand why the public wants to buy my worthless pieces of paper? Doesn’t the public have the right to buy whatever they want kana mbanje chaiyo yaakutengeswa wani (even weed is now being sold)?

The fact of the matter is that it is the RBZ themselves that have abused our trust. Trust that we did not willingly give them. It is them who issued a worthless paper called the bond note and they didn’t even give us choice to buy or decline. Overnight they exchanged USD in our bank accounts into this worthless paper that we can’t even withdraw.

It is the RBZ that printed money in 2008 and then printed zeros in our bank accounts through the RTGS system some 8 years later. And these folks are the custodians of national trust?

Zimbabwean banks wake up

I suspect that local banks and their cousins in the financial services sector are behind this directive from RBZ. That is the most myopic thing ever if true. South African banks like Standard Bank have senior executives in charge of blockchain technology. They know that technology cannot be fought, your best bet is to anticipate it, adapt for it, adapt it to your uses and manipulate it.

Zimbabwean banks probably went to RBZ running and crying in the now popular Jonathan Moyo and Savior Kasukuwere style: “Mommy technology is about to disrupt us, help us mommy, ban it, ban it please we want to remain relevant but we are too lazy to prepare for the future. We don’t mind going backwards as long as we don’t deal with this technology thing, help us mommy…

 

RBZGolix

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

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

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50 Comments

  1. Jay M says:

    Well written we do fear what we cant understand. Taking us back to the econet saga….Our Governement plays the catch up game very well

    1. Tinashe Nyahasha says:

      Hahaha “Plays catchup very well”
      Thanks

  2. Claude Ansley says:

    I choke on that RBZ’s claim to own my confidence. They most smcertainly DO NOT

    1. Claude Ansley says:

      “ they (RBZ) most certainly DO NOT own my confidence.

    2. Tinashe Nyahasha says:

      It is quite an outrageous claim isn’t it

  3. Garikai Dzoma says:

    🙂 🙂 The last paragraph just finished me. Reminds us of the other mommy who was also a Dr and her idiocy. These are knee jerk reactions from a stupid government that whitewashed itself in the aura of a new dispensation. I have been telling people to give them a chance but the pointers are there these people have a tendency to destroy with one stroke of a pen what took painstaking years to develop. That instinct to lash out is still there.

    1. Tinashe Nyahasha says:

      I also was advocating for these guys to be given a chance now I have no clue what’s the best option for Zim moving forward

  4. Lester says:

    Golix and others could’ve just shut their doors tomorrow and disappear, and no one would be able to do anything to get their money back. This is a fact: there is no legal protection from these crypto exchanges, no legal framework on how they operate, or how they transact. even internationally this is a legal problem. they can bypass RBZ exchange control very easily, and people already are doing this and abusing it. rather be objective and look beyond protecting your friends at Golix please. Zim is not the only place to ban crypto, accountability is a real issue

    1. Tinashe Nyahasha says:

      Actually by instructing the banks not to be part of the cryptocurrency community they have made that risk far greater. It’s not like the problem that cryptos are solving in Zimbabwe has been solved. People will keep trading in cryptos because they have no option but now with the formal banking institutions exiting from the transactions the risks of being duped by Golix or whoever else loom large

      The trend towards regulation is regulation at the cryptocurrency exchange level (eg regulating Golix) and not to outlaw the exchange because you can enforce KYC standards at the exchange level and this is what is happening. RBZ didn’t need to monitor the cryptoverse in it’s entirety, they only needed to station guards at the doors i.e the exchanges. Now they have decided to close their eyes.

      This is a Pontius Pilate move at best. They are not protecting the public trust but washing their hands in case things go wrong. Very much a “Yeah I don’t want to crucify this guy but you’all do what you want.” Pilate remained responsible for that crucifixion with his washed and dirty

      1. Lester says:

        I suspect its because you have been affected personally by this, that your judgement and opinion is slightly clouded and biased on this. By definition crypto is designed to be decentralized and in cases of bitcoin, to obscure ownership.

        This is correct risk management because real money is being converted into something that no one actually understands. and in most cases, those users are being manipulated into believing its a get rich quick scheme, exactly why twitter, google etc have banned crypto advertising.

        1. kobiri says:

          nxaaa

        2. Tinashe Nyahasha says:

          Far from it Lester. This is not emotional at all and this announcement in no way affects me personally nor does it Techzim except it has given us news to cover and analyse!

          Yes cryptos are decentralised and the extent is different from crypto to crypto, bitcoin being at the extreme end of decentralisation. The fact that they are centralised is what makes exchanges the only points at which regulators can enforce regulation. Banning the exchanges themselves therefore means that the RBZ is more incable of protecting you and I if we want to get into crypos. Unfortunately we need to get into cryptos whether or not the RBZ is less able to protect us because the policies of the RBZ have made it nearly impossible for us to do some types of transactions for example buying cars in Japan.

          I reiterate my point above: the RBZ has cut its arms and now the crypto space is closed to them thus they have acted to make their fears a reality and not dealt with them.

          As for the banning of crypto ads by Google and Twitter and whoever else it’s a totally different thing

        3. tinm@n says:

          Unfortunately you also lack understanding of the separation between the technology and the speculative aspect of crypto currency.

          1. Simba says:

            Gentlemen it is important you read the history of money. Need precedes legislation. Money is a means of trade, trading is with the general people and industry, the government is a dependent to this normal circle. Whether we like it or not money and value will always evolve, and crypto-currency is as paper money was to gold and gold to salt. Clearly in Zimbabwe, paper money has failed. I commend Golix for embracing this new tech and developing an effective product for the local market.

            1. Tinashe Nyahasha says:

              Hmm interesting…

  5. Kevin Mpofu says:

    Personal I think its a futile move, you cannot stop the advancements of this technology. I think the local banks are trying to hold back this technology, they fear to be left in thr dust & want to be the ones to introduce the tech as their pace. Hard monopoly.

    As for RBZ I think they haven’t figured on how they can slave bitcoin companies.

    1. Tinashe Nyahasha says:

      Yeah banks should have made themselves leaders in this new technology but they are busy fearing it. History always repeats itself when it comes to technological disruption of business models.I hope our local banks will wake up soon

      1. Happy Go Lucky says:

        You are confusing Blockchain and Bitcoin it is a critical distinction. Crypto currencies today particularly Bitcoin are a rough estimate of what future blockchain based currencies will be in the future. IN a country where the population has very few savings, the RBZ should protect depositors from cryptos until after they fully evolve. 97% of cypto currencies are will fail, you want the RBZ to take that bet with people’s money?

        1. Tinashe Nyahasha says:

          One of the links I placed in that article is to an article I concluded by saying I believe blockchain is the game changer but not necessarily cryptocurrencies.
          However, how do the cryptos fully evolve as you say if the reaction is to issue a ban? Exchanges give the most opportunity for effective regulation but now when you ban an exchange, the $20 million transactions will still happen but you will have no hope of ever knowing it let alone bring in controls. Sandboxing would have been the most effective move

          1. Happy Go Lucky says:

            Cryptos will not evolve in Zimbabwe, the technology will evolve on the international stage after which we can then regulate it. Zimbabwe didn’t do too badly with mobile money yet we waited before liucensing it in Zimbabwe. We dont have anywhere near the required amount of investment, savings, stability and ecosystem to try and “evolve” cryptocurrencies in ZImbabwe the RBZ must insulate local depositors and economy who are only warming up to cashless payments. If a huge disaster happens in Zim that shakes the local economy further it could literally be a threat to national security

            1. Tinashe Nyahasha says:

              On this I guess we see things differently and we will have to agree to disagree.
              To be honest, it’s not that I don’t hear your argument. It is valid and logical, I just hold an opposite one and unfortunately there is no way of knowing who between us is right or wrong perhaps we both are

  6. Kevin Mpofu says:

    I think the objective of the move is to oust these small bitcoin companies.

    All in all I think its a temporary dirty move.

    1. Tinashe Nyahasha says:

      Maybe it’s not as sinister as it looks. It could simply be that they are ill advised

      1. Happy Go Lucky says:

        This is a smart move by the RBZ, Zimbabwe has a shortage of foreign currency, and Golix was a loophole through which some of that Forex was being traded and a lot of money was also being laundered.

        1. Tinashe Nyahasha says:

          Will leakages be plugged because exchanges are not permitted to work with banks? Will things not get worse? The work arounds will leak more and undetected. The ban hurts the central bank more than it helps them. They have shut themselves out.
          By the way, whose fault is it that we have these currency issues that we have right now? The custodian of public trust sure has a track record of messing things up

          1. Happy Go Lucky says:

            Things won’t get worse, try trading on Golix from South Africa without a local bank account and tell me how that goes. It doesn’t matter whose fault it is, in this case the RBZ is actually doing something to close a loophole. The problem is not that the RBZ acted in this case, the real issue is that the RBZ is not acting like this more often to close all loopholes that exist (some loopholes are there by design to launder state funds for corruption and party activities. So no! the RBZ is not wrong for acting, it is wrong for not doing this more often without favor

            1. Tinashe Nyahasha says:

              Never tried trading from SA, what happens?
              As I said, your point here makes a lot of sense and I hope that the RBZ is motivated by what you say here. However, I am still holding on to my view. I am still convinced the ban was the wrong play

    2. Happy Go Lucky says:

      No! the objective of this move is to ring fence all Forex so that it goes through normal banking cjhannels. Zimbabwe has a serious foreign currency shortage and Golix has traded $20m and counting, that is a simple logical decision to shut off that avenue of trading forex with out government

      1. Tinashe Nyahasha says:

        Will leakages be plugged because exchanges are not permitted to work with banks? Will things not get worse? The work arounds will leak more and undetected. The ban hurts the central bank more than it helps them. They have shut themselves out.
        By the way, whose fault is it that we have these currency issues that we have right now? The custodian of public trust sure has a track record of messing things up

        1. Happy Go Lucky says:

          Golix was successful because it was credible and used normal banking channels. It or any other local exchange won’t become more successful underground.

          1. Tinashe Nyahasha says:

            So is that a good thing?

  7. Kevin Mpofu says:

    I think the objective of the move is to oust these small bitcoin companies.

    All in all I think its a temporary.

  8. Happy Go Lucky says:

    there is a difference between Blockchain and Bitcoin, Blockchain is the future, however, cryptos are a highly volatile speculative instrument susceptible to abuse. $20million dollars went un-taxed on the Golix platform to who knows where. The RBZ has shut the door on crypto currencies, tax evasion and flouting of forex exchange regulations, the opportunities for Blockchain are still abound. Blockchain is the future not necessarily Bitcoin. Golix should move away from creaming money off of the forex blackmarket in Zim, instead they should come up with an actual useful technology that uses block chain, an exchange is not innovation, its a way to send money to Zimbabwe without paying tax and the rBZ will stop any day.

    1. Tinashe Nyahasha says:

      One of the links I placed in that article is to an earlier article I concluded by saying I believe blockchain is the game changer but not necessarily cryptocurrencies.
      However, how do the cryptos fully evolve as you say if the reaction is to issue a ban? Exchanges give the most opportunity for effective regulation but now when you ban an exchange, the $20 million transactions will still happen but you will have no hope of ever knowing it let alone bring in controls. Sandboxing would have been the most effective move

  9. Nice says:

    Tinashe the tone you are using most certainly is biased. Secondly golix was used to Lauder money and transfer too black market prices.a service you look to be well familiar with… Blockchain is the future not bitcoin per se… I’ve been following techzim bitcoin articles since inception… You have never warned ppl of the pitfalls and just paint this one sided rosy picture… There’s no doubt that allot of your crew were early adopters… Bitcoin is purely speculative at this moment and there’s no need to create a craze that’s just not there. This is a sensible move to protect ppl by the rbz…it won’t plug the leaks and those who continue now do at their own risk… Nothing wrong with that

  10. bgaaa says:

    instead of banning bitcoin : BAN CASH…the number one contender for fraud and illicit activity

  11. Nice says:

    Cash literally has a paper trail. But bitcoin is anonymous… Cash is bulky and has security risk which is more favourable to illicit activity. Bitcoin hence who are the early adopters… Criminals … What reason would they be attracted to it so fast

    1. Tinashe Nyahasha says:

      That’s my point. Directing banks not to work with exchnges the RBZ is burning down the single point of control and now activity will continue without them knowing. That’s worse

    2. Namibia-Gio says:

      Just to be clear, it’s not anonymous. Bitcoin is pseudonymous. If you deposit fiat currency into an exchange like Golix who requires identification, everything you do with that key/wallet will be linked to you. In Bitcoin, your pseudonym is the address to which you receive Bitcoin. Every transaction involving that address is stored forever on the blockchain. If you did supply your identity (National ID, passport or driver license) to a crypro-exchange anywhere in the world or to Golix, you can be easily identified by that crypto exchange should the local or international authorities request it

      1. Tinashe Nyahasha says:

        Yes exactly. That’s what makes exchanges important. They are the checkpoint that central banks and other authorities can use to regulate crypto trade. That’s why I keep saying that cutting off exchanges is equal to the RBZ cutting off its eyes thinking just because they cannot see activity then there is no activity

        1. Namibia-Gio says:

          Yes Tinashe, Just imagine what the benefits and contributions will be when the unbanked and underground economy starts trading on a trusted platform. Zim can raise Herself to lead again.

  12. Dave says:

    Great site guys! Great exchange of thoughts and ideas. Its only through discussion that better understanding can arise. Perhaps the central bank have shut this down for now until they can get a better understanding of cryptocurrencies because in the long term it can only hurt them. There are a number of blockchain projects looking to provide ways for locals to earn income. However, this ban would prevent those funds from heading to Zimbabwe. And Zimbabwe is a potential poster child for resurrection via tech. Lets hope we see some regulatory processes come into play that allow a framework for crypto to flow.

    1. Namibia-Gio says:

      RBZ must have know about this technology but underestimated the rate at which the citizens embraced it.

    2. Tinashe Nyahasha says:

      Thanks for the compliment Dave
      We are really grateful for our community of readers, they always engage in the greatest debates. We learn from this community everyday.
      I hope the RBZ will act as you say because indeed I think it will hurt them more if they maintain this stance

  13. Widzalo says:

    Written testimony of J. Christopher Giancarlo, chairman Commodity Futures Trading Commission before the United States Senate banking committee: “We are entering a new digital era in world financial markets. As we saw with the development of the Internet, we cannot put the technology genie back in the bottle. Virtual currencies mark a paradigm shift in how we think about payments, traditional financial processes, and engaging in economic activity. Ignoring these developments will not make them go away, nor is it a responsible regulatory response. The evolution of these assets, their volatility, and the interest they attract from a rising global millennial population demand serious examination.”

    RBZ would do well to heed the above statement. Banning is extreme!

    1. Tinashe Nyahasha says:

      Oh quite spot on. I don’t know what will happen to the currencies themselves but how we view the world of finance is forever changed. Instead of banning, we should just commit to learn whilst of course limiting risk

  14. Van Lee Chigwada says:

    Tinshe Tinshase, no no and no. No.
    No.

    MoPSE makes it impossible to stand in front of children and give them learning materials because approval, control, brainwashing. We can’t have every Jack and Jill giving out un-approved Educational materials in schools. Your stuff could be wrong, political, religious and more. By comparing your Ed-Tech to a bunch of T-Shirt vendors you are wrong.

    I have worked in both education and health and it is similar. You don’t just show up and start donating stuff in health. People could die.
    Oh, I also have Ed-Tech products being used by thousands of students everyday and I haven’t yet stood in front of school kids.

    Moving on, why are you throwing stones at RBZ? Google did the same thing. One of the largest global technology companies and just because Zimbos pass the same legislation, they are wrong? Come on man, be fair.

    Zimbabwean banks are woken up. Very much. There is no competent economist trading in Crypto-Cs because that is gambling. Stock Traders gamble but with known metrics, not some imaginary currencies that only work in XYZ setting and don’t work anywhere else.
    Even bond notes are worth something because I can sell them for forex on the streets.
    Can’t do that with Barber-Coin (that Crypto-C uses to pay barbers.)

    Come on, and you are defending this kind of fragmentation?

    Bond notes will go, one day. Be patient.

    1. Tinashe Nyahasha says:

      Very valid point about my EdTech startup. Didn’t want to be infront of school kids though. We also offered websites for free, at least that could have been approved right?

      I don’t konw about competent economists hangu but my conviction is a sandbox license could take out a big chunk of the risks but still allow for learning in fact it would facilitate learning. An Uber self driving car killed a person. I don’t see a rush to ban self driving car research.

      As for Google, they banned the ads because most were of ICO’s and get rich quick schemes but we didn’t see Google exclude exchanges from search results did we?

    2. Widzalo says:

      How come bitcoin futures are being traded openly on exchanges in the US?

      As regards schools, is it not the prerogative of the authorities to review what is being proposed before sanctioning such rather than not having interest at all?

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