Are South African & Zimbabwean Banks Intimidated By Cryptocurrency?

A few weeks ago I posted about two pretty exciting cryptocurrency initiatives going on in Africa. Firstly Zimbabwean based exchange Golix has been rolling out cryptocurrency ATM's across the country to help locals bypass the current banking limitations and regulations and also allow them some financial freedom

You can read all about it in my post - Zimbabwe Gets Its First Cryptocurrency ATM

Then not even a week later it was announced that neighbouring nation South Africa would also be getting their first ATM

You can read about it in my post - South Africa To Get Its First Cryptocurrency ATM

The support from the cryptocurrency community in the Southern African region has been overwhelmingly positive as this news broke even though these are not national rollouts but regional trails. But hey in crypto it doesn't take much for us to get excited, does it?

These tiny milestones shouldn't affect massive institutions like central banks, right? They're so huge and control the countries wealth, right? Well, it looks like it has, with some pretty bold statements from South African reserve bank and some pretty bold moves by the Zimbabwean reserve bank.

Centralised banking in Africa

If you've banked in South Africa or Zimbabwe you'll know that the banking industry is a bit of an oligopoly with no real disruption in recent years apart. They have ridden the coattails for far too long, the service is shockingly poor, the fees are way too high and they're simply keeping their well-oiled cash cow going at the expense of the people and add very little value to the economy.

If you're saying well they make sure we facilitate trade and all that yes that's what banks supposed to do, what do you want? A cookie every time you do your damn job! Cryptocurrency can do the same thing, faster better, cheaper without a need for my ID or drivers licence and stand in a queue for more than a lunch break allows.

Response from South African banks

The South African Reserve Bank, the central bank of the Republic, has chosen to call digital currencies “cyber-tokens” because they “don’t meet the requirements of money,” Bloomberg reported May 24.

Francois Groepe, Reserve Bank Deputy Governor, explained the position of the bank:

“We don’t use the term “cryptocurrency” because it doesn’t meet the requirements of money in the economic sense of the stable means of exchange, a unit of measure and a stable unit of value. We prefer to use the word ‘cyber-token’.”

The Reserve Bank has established a fintech task force to review its stance toward private cryptocurrencies and address regulatory issues in order to develop a relevant policy framework and regulatory system. Groepe said:

“We want to ensure or establish whether there is still compliance with the relevant financial surveillance or exchange-control regulations.”

Central banks around the world have approached cryptocurrencies with varying degrees of skepticism and disapproval. In February, Bank of England Governor Mark Carney declared that Bitcoin cannot be considered a legitimate currency by “traditional” definitions, because it failed to meet two major requirements of a traditional currency. He claimed that Bitcoin is neither a means of exchange, nor a store of value.

My response to this

These kinds of statements to me appear malicious and screams of FUD. This sort of fear-mongering is to dissuade the South African public away from the use and adoption of cryptocurrency and is an argument based on ignorance and abuse of power.

Who decides that cryptocurrency should comply to your standards? When we as a community drive the consensus of how it is used. This is the nature of decentralisation, either you adapt or fall by the wayside. Feel free to hold on to your precious reserves of archaic inflationary currency and leave us be.

Personally, if I was allowed to earn, buy my shopping and purchase from online stores I would have very little use for fiat. Probably just to pay for petrol and my bills. This screams of self-preservation to me as they look for ways to keep us in their ecosystem so we can be continue to be charged and taxed on our money and use of it

Response from Zimbabwean banks

While turning our attention to Zimbabwe, the Zim based exchange Golix has filed a lawsuit over the recent Reserve Bank of Zimbabwe (RBZ) ‘cryptocurrency ban’ that was issued in a financial guidance circular earlier this month. Now, according to numerous regional reports, the Zimbabwe High Court has ruled in favour of the trading platform’s argument because the RBZ failed to show up to the trial.

Earlier this month, the Reserve Bank of Zimbabwe (RBZ) issued a circular ordering all financial institutions to stop servicing cryptocurrency exchanges and begin to liquidate existing crypto-related accounts. Head of the RBZ Norman Mataruka explained the decision, saying that the RBZ has an

“obligation to safeguard the integrity of payment systems”, and the central bank is not prepared to provide such a safeguard for crypto.

Multiple regional news outlets and individuals on social media have reported that the Zimbabwe High Court has lifted the RBZ ban against cryptocurrency activities taking place within the country. The local digital asset exchange Golix decided to take the case to the High Court stating the RBZ had no right to enforce such laws and only the country’s parliament can issue a financial ban.

On May 24 one of the legal team members, and a constitutional lawyer, Fadzayi Mahere, announced the victory to her Twitter followers stating: RBZ ban on cryptos lifted by the High Court. Administrative justice is alive and well in this jurisdiction. Section 68 of the Constitution is our best friend.

Reserve Bank of Zimbabwe Representatives Fail to Attend Harare High Court Trial Alongside Fadzayi Mahere, the Golix team was represented by another attorney named Hopewell Chitima. The legal team used Section 68 of the country’s constitution but no representatives from the RBZ showed up to the trial. Regional reports state that because of this action, the Harare High Court justice ruled in favour of the Golix team. High Court judge Alphas Chitakunye’s ruling states:

The ban issued by the Respondents [RBZ] through letter dated 15 May 2018 against Applicant directing it to cease operations, shut down its virtual currency exchange business and ordering the closure of its bank account with its banks is hereby reversed and set aside.

My response to this

Having an outright ban in a country that has suffered from hyperinflation and had to discard their own currency in favour of foreign aid (which comes at a price) and opting for the US dollar makes no sense. Not only that the current banking infrustructure only allows for small transfers of money as withdrawl limits are set since there is only so much currency to go around limiting Zimbabweans use of money and also driving up fthe requency of withdrawl which only benefits banks.

Trying to ban cryptocurrency in a country that is primed to be a first adopter and case study along with the Marshall Islands is counter productive to the prosperity of the country as a whole and shows how the desperate the powers that be are, to retain power over the people.

Have your say

What do you think about the response of these banks? Do you think real-world applications for cryptocurrency will begin to pick up? Do the banks think they stand a chance against what seems to be inevitable?

Drop me a comment and let me know what you think!

Let's connect

For more cryptocurrency and my opinion on the market feel free to follow me @chekohler

Sources:

• Cointelegraph
• Bitcoin.com