Banks In Zimbabwe Prohibited From Processing Virtual Currency Payments

Banks in Zimbabwe have been ordered by the county’s central bank not to trade or process payments that are linked to digital currencies such as bitcoin (BTC). However the governor of Zimbabwe’s central bank did not ban local virtual currency exchanges.

According to enthusiasts of digital currency in the African nation one advantage of cryptocurrencies is that they provide protection to hyperinflation. Additionally virtual currencies are used to engage in e-commerce. They are also used to send money to family members who are studying abroad.

With the ban the price of bitcoin shot up sharply to a figure of $12,000 while in other major exchanges across the globe it was trading at below $9,000. Following the hyperinflation that was witnessed in Zimbabwe close to a decade ago, the government abandoned the Zimbabwe dollar and instead turned to foreign currencies such as the United States dollar and the South African Rand. However U.S. dollar banknotes are scarce and sometimes results in Zimbabweans having to queue for hours outside financial institutions in order to get some and sometimes they don’t get ant.

According to the governor of the Reserve Bank of Zimbabwe, John Mangudya, no one in the country has been licensed by the central bank to engage in the trading of digital currencies. Thus the investors and the traders who are in the cryptocurrency space would have no legal recourse if they ever needed the protection of the law. Per Mangudya cryptocurrencies were best suited for illegal activities.

 “The Reserve Bank has directed all banking institutions not to provide banking services to facilitate any person or entity in dealing with or settling virtual currencies. The nature of cryptocurrency transactions make them the currency of choice for money launderers and other criminals,” said Mangudya.

According to an insider in the cryptocurrency sector in Zimbabwe the prohibition by the country’s central bank would only affect the settlements that occur between exchanges but would have no impact on peer-to-peer transactions.

Prior to this move by the Reserve Bank of Zimbabwe the ccountry’s central bank had issued a couple of warnings against cryptocurrencies. The central bank’s registrar and director, Norman Mataruka, had late last year said that the use of bitcoin in the country was illegal. At the time Mataruka also indicated that the Reserve Bank of Zimbabwe would study the matter further before taking any step.