eBusiness Weekly
Jeffrey Gogo
Cryptocurrencies are banned in Zimbabwe, but not the technology that supports them called blockchain. Blockchain has become a buzz-word in most circles and it is often described in terms of its disruptiveness. It is certainly the case that most sectors have experienced disruption in some shape or form.
However, the financial services sector appears to have taken a greater share of disruption so far through cryptocurrencies. Although developed nations stand to benefit from the blockchain phenomenon, there is growing evidence that developing countries could see more tangible benefits should the correct approach be adopted.
A closer look at one project in particular serves to demonstrate how traditional banking can be threatened by crypto assets.
In the interview below, the Business Weekly speaks to Prosper Mwedzi, a 33-year-old Zimbabwean lawyer based in the United Kingdom, and founder of a tourism-centred digital currency called the Victoria Falls Coin.
Mwedzi, a long time cryptocurrency enthusiast who has started a campaign lobbying the Reserve Bank of Zimbabwe to lift the ban on virtual money, discusses how the blockchain could help positively transform the country’s financial system.
We are represented BW and him PM:
BW: You speak of the risk of legacy banks becoming obsolete. And how one emerging technology is already making this happen. How exactly are they doing this?
PM: The Revolut project based in the UK has managed to harmonise traditional banking with digital assets in a very groundbreaking and interesting way. Issuing a mastercard and combining it with a mobile app which enables withdrawals at ATMs direct from crpto-fiat, payments at a point of sale straight from crypto assets, holding fiat in multi-currencies, holding multi-cryptocurrencies- all under one app is quite a milestone for fintech. The ability to shapeshift from one currency/crpto asset to another with the click of a button thereby by-passing bureaux de exchanges and digital asset exchanges is quite another thing. Revolut also enables sending all currencies including crypto assets seamlessly and at no fees. Sending money has become as simple as sending a text message as one only needs to send a link for the receiving party to start “downloading” money. If all this is not the embodiment of disruption, then it is quite telling of what is still yet to come.
BW: So what? How does that benefit Zimbabwe and Zimbabweans?
PM: It is worthwhile to explore how projects such as Revolut can disrupt financial services in Zimbabwe and Africa as a whole. According to figures released by the Reserve Bank of Zimbabwe, $60 million per month is remitted to Zimbabwe from the diaspora. A lot of fees are incurred in moving these funds around as parties have to pay fees due to conversions to USD from native currencies. These fees amount to money which is being lost in transactions.
Deploying technology similar to what Revolut is employing could increase money available in the system. It will make it possible to send sums as low as $1, which is currently uneconomical, if not impossible due to red tape. It could encourage the remittance of funds from across the globe in a more efficient way.
Benefits will also accrue to businesses which are struggling to pay suppliers because banks are unable to provide the necessary guarantees for payments abroad for one reason or another. With a solution similar to Revolut’s, businesses will be able to hold funds which are not required for immediate use in crypto assets thereby benefiting from an increase in value, which is better than the low interest given when held in current accounts. For example, if one is to look at the historic value of Ethereum some interesting facts can be established. As of 12 January 2012, one token of Ethereum hit $1.07. Today, it is worth US$536. With the benefit of hindsight, a business which would have taken a strategic view and invested in Ethereum would not have required to make a huge investment to get a windfall in 2018.
BW: Pretty optimistic figures there., We know that cryptocurrencies are extremely volatile and so these figures could never be absolute. You still think Revolut’s plan could still revolutionise banking activities in Zimbabwe?
PM: Yes. The other benefit of the Revolut solution is that it makes it easier for technology dinosaurs to access the crypto assets market within an environment which carries low risk.. This has been the main barrier to adoption and this new product on the market is evidence of crypto- assets getting embedded into traditional financial services for the average person.
Revolut is regulated by the UK Financial Conduct Authority, which means that there is some level of protection and redress for consumers should there be a problem.
BW: You know that the Reserve Bank of Zimbabwe has effectively banned cryptocurrencies and that adopting a technology like Revolut’s here is going to be an uphill task. Do you believe this will ever happen here, and what needs to be done for that to happen?
PM: To enable a similar project to be adopted in Zimbabwe, regulators would have to approach this space with an open mind in order to accommodate innovation. Money laundering risks which are often cited by regulators are managed in the Revolut solution by not allowing external deposits of crypto into accounts. This means that Revolut accounts can only be funded through bank accounts whereby users would have already gone through checks. Further checks are also done when signing up for the account. This, coupled with the launch of various cryptocurrency derivatives suggest that the crypto assets space is gaining momentum and getting closer to maturity. The fact that major financial institutions such as Nasdaq Stock Exchange, Goldman Sachs, JP Morgan and the likes have thrown their weight behind the sector means that crypto assets are beginning to find a place within the financial ecosystem.
The implications are that developing countries will have to warm up to these new developments. Getting the level of investment required is not going to be an easy process. It will require friendly policies which make businesses want to invest in the country. Creating a hostile environment through bans will only exacerbate the crisis and turn investors away. It would appear that some African countries have woken up to this reality and are making headway in this regard and one such place is Uganda which stands to get a huge investment from Binance, the biggest crypto assets exchange in the world by profits.
BW: Banks could resist the change, one may argue. You really think they will be left behind if they refused to evolve?
PM: The arrival of Revolut on the market gives banks the long overdue kick in the teeth and delivers the message loud and clear – transform or you could become what CDs have become in music.
The debate has long been about ‘if’ crypto assets will deliver but this conversation has moved on to a case of ‘when’ it happens.
There has been a lot of complacency within the banking sector since the advent of plastic card payments. Crypto assets are the perfect storm brewing in a tea cup, ready to engulf the banking sector. The next revolution is going to be a gargantuan leap, and it will take a lot of faith to embrace. What seems to be clear about this space is the fact that it brings along a lot of promises to consumers and many are clinging to the hope that this will translate into actual benefits.
