Volumes fall as cryptocurrency ban takes effect

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Jeffrey Gogo
Volumes have dropped sharply on Harare digital currency exchange Golix — the country’s biggest dealer — after banks started to comply with a ban on cryptocurrency trading by the Reserve Bank of Zimbabwe.

Only 0,34 Bitcoin’s worth (or $4,270 on the average) changed hands on the exchange in the 24 hours to May 22.

This is a decline of more than 75 percent from the 1,4 Bitcoin (BTC) traded in the 24 hours to May 9, two days before the ban.

The 30-day average has tanked about 13 percent to 38,4 BTC or $476 000.

Over 44 Bitcoins were sold on Golix in the month to May 9.

The volume decline may also have coincided with the fall in cryptocurrency prices in the past two weeks.

Bitcoin has dropped more than 12 percent during the review period.

The central bank two weeks ago gave commercial banks 60 days to cut ties with cryptocurrency exchanges Golix and Styx24.

RBZ concluded that digital currencies were too risky, endangering the country’s “financial stability”.

On May 16, five days after the ban was imposed, investors on Golix started to notice they could no longer make fiat deposits or withdrawals, even though they are still able to buy or sale their coins.

The ban seemed to hit exchanges and investors late afternoon that day.

Earlier in the day, Golix could still settle bond notes payments.

It is still not clear how the Gweru-based exchange Styx24 was affected.

At the last time of checking, Styx24 did not have a corporate bank account, having been turned down by Standard Chartered Bank, the exchange’s preferred bankers.

Instead, Styx24 facilitated cash transfers through the personal bank accounts of chief executive Tatenda Mabungu.

But even that, the RBZ stopped it.

Its ban also directs the closure of individual bank accounts of virtual currency investors.

In that sense, Mabungu may have been hit hard.

In the dark

At Golix, which banks with CBZ Bank and Steward Bank, a few people didn’t quite know what was happening yet, and showed disappointment over the delayed settling of payments.

“Roughly how long does a withdrawal into Ecocash take from status “accepted” to actually receiving the funds at the beneficiary Ecocash number?” Quipped one Hon Robert T. Chamisa, on Golix’s Facebook page.

He was responding to a completely unrelated post by Golix on May 18, one, as it were, quoting an anonymous philosopher over the wisdom of shared happiness, may be thought of as designed to cheer up investors at a time of uncertainty.

“There was a time when you (Golix) put up a message on the exchange stating that such transactions were now done within the hour. Contrary to this, I have two withdrawals initiated last night (May 17) which haven’t yet hit my Ecocash account,” Chamisa complained.

Another investor, only listed as ‘Pee Dee’, was furious. “Golix, why are we not getting any communication from you?” Pee Dee enquired. “Withdrawals are taking very long. Will l get any communication from you guys on what’s going on? Golix team, the least you can do is communicate with us. I withdrew because l need the funds urgently,” Dee lamented.

Golix never responded to both requests.

Not unexpected

The Reserve Bank of Zimbabwe move on cryptocurrencies caught many by surprise, if only to the extent of its extremity, but was not unexpected.

The central bank said virtual currencies could fuel tax evasion, money laundering, theft and fraud, even without evidence to back up the claims.

The decision pits the rising popularity of digital currencies among thousands of Zimbabweans, against a central bank that, until now, had not shown a keenness to abolishing trade or investment in such assets.

At Press time, the Business Weekly had not managed to get comment from those banks providing services to crypto exchanges or the people investing in cryptocurrencies.

It is important to note that, on its own, the Reserve Bank directive does not altogether stop cryptocurrency trading.

Investors can still trade peer-to-peer on social media forums, but without the safety provided by a central exchange like Golix, which hitherto had solid links with commercial banks.

Without banks, the risk of theft or fraud — some of the RBZ’s greatest fears — is multiplied.

A person like Pee Dee above, the irate Golix customer, would have to find a willing buyer of crypto say on Facebook or WhatsApp, agree on price, arrange for a meet, and finalise transaction in person.

Meetings of this nature are inherently very risky, exposing investors to physical attacks, robbery or any other such malfeasance.

So, the RBZ may have essentially achieved the opposite of what it intended to achieve with the ban.

Talks to lift ban

Golix said that it is in talks with the Reserve Bank over the ban, seeking a reversal.

The exchange told investors in a statement last week that “our team will do our best to reach out to both our banking partners and the central bank.”

“We think that blockchain technology will transform the financial marketspace for many years to come, and Africa should not be left behind,” said Nhlalwenhle Ngwenya, the Golix spokesperson.

“We also think that as we explore this space, it is important to work and engage with all stakeholders, including regulators.”

Ngwenya said they understood what the RBZ was trying to accomplish, given the risks involved in digital currencies.

But the risks could be tackled “through regulated centralised exchanges”, and not necessarily via bans.

Styx24 company chief executive Tatenda Mabungu, did not respond to requests for a comment.

Analysts have criticised the Reserve Bank of Zimbabwe for being haste, and of lacking vision.

“I honestly don’t know where they (RBZ) are coming from with this and what it’s meant to achieve,” technology writer Soul Kabweza, mused, in an interview with the Business Weekly .

“My view is that a more progressive stance would have been to regulate the exchanges and have reporting requirements that help feed data and, therefore, an understanding of the cryptocurrencies ecosystem,” said Kabweza, who writes for online magazine techzim.co.zw <http://techzim.co.zw>.

He drew parallels on how the central bank had failed to tap into cross-border money transfers by bus drivers.

“A related industry and it’s informal channels to consider is the remittances industry. The bus-driver-remittance channel is not alive because the bus drivers hold accounts with banks. It’s alive because people need the service,” Kabweza explained.

“The RBZ, unfortunately, has no eyes into the bus-driver-remittances ecosystem and it loses out on important data. With the crypto ban, it may be that the RBZ has chosen to lose the opportunity to see into the crypto value ecosystem,” he added.

Cryptocurrencies, as represented mainly by Bitcoin, have since launch in 2009 drawn criticism and support almost in equal measure.

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

The RBZ’s move on May 11 forced Golix to suspended what would have been Zimbabwe’s maiden Initial Coin Offering of $35,8 million, which was due to open May 14.

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