Disrupting the disrupter: Global regulators keen to end Bitcoin?

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Jeffrey Gogo
A Zimbabwean equities trading firm looking to initiate coverage on Bitcoin has abandoned ship, frustrated by the continuing global onslaught on digital money by policymakers and regulator.

For professional reasons, we shall not name the company in question.

But a director with the Harare-based stockbroking firm told the Business Weekly that: “After initial research, we decided to abandon the process.

“I think there is a global fight against cryptocurrencies by regulators, volatility (is) just too much.”

Bitcoin has since its launch in 2009 drawn criticism and support almost in equal measure, more so since its 1,400 percent surge in 2017, and the subsequent fall this year.

Venerated investor Warren Buffet has said the digital currency “will come to a bad end”.

Robin Vela, chairman at Zimbabwe’s biggest pension fund NSSA, described Bitcoin as having “flavour . . . ignore at own peril.”

Worldwide, financial regulators, governments and central banks have, and continue to, come down hard on the digital money, accusing it of lacking a legal footing — essentially a euphemism for wanting control over it.

And it does not help matters that the international price of Bitcoin has crashed to $6 000 in recent weeks from $20 000 in December.

Though this looks like a result of both the clampdown from authorities and the inevitable price correction.

In November, the Harare stockbroking firm released its first research note on Bitcoin trading in Zimbabwe, as the mania began to take a hold.

The note covered the basics of Bitcoin: from background to account registration on Golix, and from trading to how to make a deposit and withdrawal on the exchange. It also looked at the dynamics that influence Bitcoin to trade at a premium in Zimbabwe and several other issues.

The idea was to assess and understand the risks and benefits of cryptocurrencies, particularly Bitcoin, the grand-dad of all digital money, following an explosion of interest — and investment — in them in 2017.

Had the test succeeded, the firm would eventually start a more comprehensive coverage of Bitcoin: tracking daily prices, blockchain network development, technical and fundamental price analysis, etc — more of the same kind of services offered in equity trading.

It could have created some leverage for those investors keen on moving money in between different asset classes, those intent on diversifying to carve out an allocation for digital assets led by the likes of Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ripple and others. Yet the while helping to mainstream cryptocurrencies.

But the securities company soon found out that too much interference by regulators could introduce instability in crypto markets.

And unlike stocks which are more stable, such interference could cause massive financial losses for crypto investors.

Disrupting the disrupter

In the end, the stockbrokers gave up the idea of adding Bitcoin to the list of their portfolio of research.

It is another thing whether the stockbroking licence allows for crypto activities.

But there is some credible conspiracy that the charge against Bitcoin is meant to protect the interests of old, powerful kleptocracies in the financial world.

And to ensure governments maintain their choke-hold on fiat money, a key political and economic tool.

Perhaps end Bitcoin altogether, a currency that, unlike the traditional grind of old economies, created countless millionaires overnight by simply playing the markets right?

Or, perhaps, significantly wear out emerging interest from those already in the mainstream, as has happened with the Harare-based equities trading firm, to prevent any further growth and acceptance of the virtual currency?

For, undoubtedly, Bitcoin threatens to take control away from governments, with its professed independence.

The control freaks they are; governments have refused to take this lying down.

The European Central Bank (ECB) announced this week that it will launch a new settlement system called Target Instant Payment Settlement (TIPS), in November.

An official with the ECB told Bloomberg that the bank’s technology will be better than blockchain, the technology that underlines Bitcoin.

TIPS will be faster, cheaper and smoother as a payment option, said Yes Mersch, an executive member with the European Central Bank.

The financial potential of blockchain — a system that rounds up transactions by investors into what are known as “blocks”, to be solved by math — could be tremendous, particularly in the financial industry.

But the ECB’s latest offering seems clearly reactionary, created to deflate Bitcoin’s bubble and, as someone put it, “disrupt the disrupter”.

TIPS may be the clearest indication yet that global financial authorities aren’t exactly thrilled about Bitcoin, they want it out of the way, by all means.

From China to South Korea, Australia to the US, financial regulators have made it their goal to bring cryptocurrencies under their control, shutting down digital currency exchanges or effecting strict regulation for their trade.

Here, Reserve Bank of Zimbabwe governor John Mangudya has made no indication of taking similar drastic measures.

Though he has talked tough on digital currencies.

In a statement on December 21, he warned that people dealing in cryptocurrencies were doing so “at own risk and will not have legal protection from, or against, any regulatory authority”.

We can expect the RBZ to step into the crypto space as a regulator in future, but current warnings speak more of the central bank’s cautious approach, careful not to stampede a pioneering technology that could change the way Zimbabwe do business.

Clearly, the old guard is getting the cryptocurrency system all twisted.

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