Harare, Zimbabwe – When Mathuli Encube was appointed Finance Minister of Zimbabwe in September 2012, the country’s crypto enthusiasts hoped that he would lift some of the restrictions imposed on cryptocurrency trading.
The real optimist hoped he would become a champion in digital currency.
“When he joined the government, he was excited about cryptocurrency,” William Chui, one of the founders of the now dormant cryptocurrency exchange Golix in Harare, told Al Jazeera.
A year before Enquib’s appointment, Zimbabwe’s central bank instructed all banks to stop processing cryptocurrency-related transactions, calling Bitcoin and other Altkin choices “the currency of choice for money launderers and other criminals.”
The decree saw Chui’s tightly closed shops and crypto traders fall off the radar of government authorities.
But on a trip to the UAE last month, Enquib at least praised some of the potential qualities of crypto.
“I visited the DMCC Crypto Center in Dubai, an interesting incubation hub for cryptocurrency and payment solutions,” Ncube tweeted during his visit to the UAE last week. “Solutions have been found that can reduce charges for expatriate remittances.”
I visited the DMCC CRYPTO Center in Dubai, an interesting incubation hub for cryptocurrency and payment solutions. A solution has been found to reduce the charges for remittances from expatriates. pic.twitter.com/krhW8EJHLE
– Professor Mthuli Ncube (thMthuliNcube) September, 2021
But despite the official outcry, some believe Zimbabwe is on the verge of lifting its ban on crypto transactions.
Many crypto supporters see Enquiber’s tweet as a signal that the Zimbabwean government – like the governments of other countries – is simply trying to cherish some of the benefits of blockchain technology without financial control.
Blockchain Yes, not Bitcoin
According to the World Bank, about three million Zimbabweans live abroad and the remittances they send home account for more than 7 percent of the country’s economic output.
But intermediaries accept a large portion of the remittance pot for themselves: a commission fee of 10 to 20 percent to facilitate remittances from abroad.
“Costs can be significantly reduced through disrupted blockchain technology,” said Clive Mfambella, chief communications director at the Ministry of Finance.
“The use of blockchain is much broader than just crypto. We have a sandbox group to analyze the use of blockchain technology in Zimbabwe, created by the Reserve Bank,” he told Al Jazeera.
But some questions are the official impetus for blockchain technology.
“I don’t think the government would be willing to accept it,” said Batnai Mayo, a Harare-based crypto trader. “This means they will relinquish part of their power to control the financial system.”
The use of blockchain is much more extensive than just crypto.
Chui, one of Zimbabwe’s leading cryptocurrency traders and promoters, also suspects that government blockchain incentives will soften the government’s crypto ban.
“Unfortunately, the government has not yet recognized cryptocurrency as an asset class,” Chui said. “I think his tweet was more personal and in no way represented the government’s point of view.”
Zimbabwe is rarely alone. Governments around the world have imposed restrictions and even all-out restrictions on the transactions and use of cryptocurrencies as they try to strike a balance between cutting off the benefits of blockchain innovation without losing control over financial systems and policies.
But a hard line can have unintended consequences. After Zimbabwe banned cryptocurrency transactions, the country’s crypto traders went underground. They now rely on social media from a network of strict traders and enthusiasts to buy and sell digital assets in the country.
Unfortunately, the government has not yet recognized cryptocurrency as a resource class.
“Transactions are currently ongoing on a peer-to-peer basis,” Chui said. “We use social media to trade, be it Signal, Telegram, WhatsApp and Facebook.”
But the solution is problematic, he added. Buying and selling orders can take much longer to process, resulting in lower profits and larger losses. Social media platforms are also fertile breeding grounds for fraudsters. In a notorious case, a crypto pyramid scheme has reportedly cost investors 5 5 million.
“People have cheated millions of rupees,” Chui said.
Even if the government adopts crypto, economists say Zimbabwe may lag far behind the innovation curve to nurture a competitive indigenous crypto industry.
“We lag far behind Dubai in terms of cryptocurrencies, and when you look at locals, there are issues of trust and security in their finances,” Harare-based independent economist Victor Voroma told Al Jazeera.
If the government finally softens its extremism, Bhoroma it is slowly happening.
“Based on what has happened in the past where people have lost millions in pyramid schemes and failed to recover money, crypto adoption is going to be slow,” he said. “We are a very backward market. Yes, they will initially adopt but in the short to medium term, I don’t see many people adopting the use of cryptocurrencies widely.
But Chui said the child’s move by the government would also be an improvement.
“I think a lot more can be done to protect people who trade in cryptocurrencies,” he said. “If controlled exchange is approved and licensed, it will help bring transparency and certainty to the market.”