Zimbabwe’s High Court lifted a ban that was imposed by the country’s Central Bank, which barred all banks and financial institutions from facilitating any cryptocurrency related transaction earlier in May. The bank opposed the use of cryptocurrencies because it felt that the nature of the transactions made cryptocurrencies an easy target for money laundering and terrorist funding activities.
Zimbabwe’s apex bank isn’t the only financial institution that is unfriendly towards cryptocurrencies. Financial institutions, companies, government bodies, financial regulatory bodies, and critics are of the opinion that cryptocurrency is a means for money laundering, tax evasion, and terrorist funding. Its decentralized nature is highly unwelcome by the centralized financial sector. Some government institutions like China have taken a step further to place an outright ban on cryptocurrency trading, while some others like Japan have a financial regulatory body who is very particular about security and have set new criteria for cryptocurrencies.
The Ban by the Reserve Bank of Zimbabwe
The Reserve Bank of Zimbabwe, which is the country’s central bank, issued a circular on May 12, 2018, prohibiting other Zimbabwean banks from working with cryptocurrency exchanges or holding any accounts of people trading in cryptocurrency. The apex bank gave a 60-day ultimatum to end any existing relationship with cryptocurrency exchanges.
The central bank governor, John Mangudya, said that the central bank had not given license to anyone to trade in cryptocurrencies and that dealers and investors did not have the protection of the law. The major reason why the apex bank made this move, was to protect the public and guard the integrity, safety, and soundness of the country’s financial system.
Another reason why the apex bank was banning cryptocurrency trading was the danger involved with virtual currencies, which include high volatility, theft or fraud, money laundering, and externalization of funds in violation of a country’s laws. It also said that cryptocurrency can be used to facilitate tax evasion. The circular was signed by Norman Mataruka, Registrar of Banking Institutions.
Golix Sues Reserve Bank of Zimbabwe
Golix the first and largest cryptocurrency in Zimbabwe, is a digital currency exchange that helps buy and sell Bitcoin and other cryptocurrencies for people in Sub Saharan Africa. The company operates a Bitcoin ATM in addition to its online virtual currency market. The announcement by the Reserve Bank of Zimbabwe to shut down all cryptocurrency operations was not taken well by Golix. Few days after the bank’s ban, the exchange platform decided to take the central bank to court.
According to Golix, the action taken by the central bank was highly unconstitutional as there were no laws empowering the bank to make such legislative moves. It also said that the central bank was claiming to classify the trade in cryptocurrency as illegal. In its application to the High Court in Harare, Golix said “The ban in effect outlaws and classifies as illegal Applicant’s operations.” Golix further argued that the action taken by the central bank had no right to ban cryptocurrency operations, as only the parliament had the right to make such decisions.
The Verdict by Zimbabwe’s High Court
Following the order by the central bank to completely stop cryptocurrency trading and Golix’s lawsuit against the bank, the High Court in Harare has in its court proceedings lifted the ban placed by the central bank. Officials from Reserve Bank of Zimbabwe, however, did not show up in court on the day of the hearing, which prompted the court to rule in favor of Gilox
The news brought relief to crypto traders and investors all over the country, who were unable to trade on the exchange platform after the central bank’s announcement. One of the teams of barristers who challenged the ban, Advocate Fadzayi Mahere, took to her Twitter account and posted the news. Her tweet reads thus “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!