The Reserve Bank of Zimbabwe has said that virtual currencies or crypto-currencies present risks such as money laundering, terrorism financing, tax evasion and fraud as they are not regulated by Zimbabwe’s laws.
This comes as the question of how to regulate virtual currencies continue to dominate markets worldwide after Bitcoin rallied to record highs as use continues to increase both locally and globally.
It also comes as regulators across the globe are beginning to address challenges presented by virtual currencies that bypass regulated banks.
Virtual currency is defined by the Financial Action Task Force (FATF), as “a digital representation of value, that can be digitally traded and functions as (1) a medium of exchange; and /or (2) a unit of account; and / or (3) a store of value, but does not have legal tender status.”
Because the current players in virtual currencies including bitcoin are mostly opaque and operate outside of the conventional financial system, regulators are concerned about money laundering, terrorist financing, tax evasion and fraud.
In the United States, the Securities and Exchange Commission and the Commodity Futures Trading Commission have sent out a flurry of announcements in the last few months on the subject, including some strong statements by Jay Clayton, the SEC chairman.
And now Zimbabwe’s central bank says that as the virtual currencies are not regulated by the country’s laws and presents risks such as money laundering, terrorism financing, tax evasion and fraud.
“Under the existing legal and regulatory dispensation, any person who invests in virtual currencies, does so at own risk and will not have legal protection from, or recourse against, any regulatory authority,” said RBZ governor Dr John Mangudya.
Dr Mangudya said virtual currencies are attractive to money launderers and other criminals because of the supposed anonymity and ease with which transactions can be conducted, on the internet and across borders.
“Virtual currencies are not only unregulated but are also neither issued by public authority nor guaranteed by the State.
“In this regard virtual currencies are not in any way attached to notes and coins circulating in the country. Virtual currencies do not have legal tender status in Zimbabwe or in any jurisdiction in the world,” he said in a statement.
The table below shows what the US is doing which makes it plain that the US authorities do not regard Bitcoin as a currency.