Zimbabwe’s Central Bank Puts Cryptocurrencies in the Morgue
- The Reserve Bank of Zimbabwe bans all financial institutions from recognizing cryptocurrencies
- Cryptocurrency exchange Golix cancelled a $32M initial coin offering
The Reserve Bank of Zimbabwe dealt a major blow to the country’s cryptocurrency industry by banning their recognition at all financial institutions. Cryptocurrencies have been a popular form of bridging gaps in the availability of cash in the country. What impact will this policy move have on cryptocurrencies in Zimbabwe?
Why This Matters: For decades Zimbabwe has buckled under the weight of astronomical levels of inflation. At its peak in 2008 inflation reached 79.8 billion percent, the second highest level ever recorded behind Hungary. Inflation has subsided significantly since then, but the country still uses multiple currencies as opposed to one. Following a coup in 2017 Zimbabweans turned to cryptocurrencies in effort to preserve the value of their cash out of fear that hyperinflation would re-emerge.
This ban does not come out of the blue for Zimbabweans. In December the Reserve Bank issued a circular memo, warning financial institutions on the risks associated with cryptocurrencies. Golix, the largest cryptocurrency exchange in Zimbabwe had planned a $32 million initial coin offering to fund expansion to other African markets. The exchange released a statement on Twitter stating it understood what the Reserve Bank was trying to accomplish. It also noted they would work with banking partners and the Reserve Bank to address concerns with cryptocurrencies.
What’s Next: Financial institutions have 60 days to comply with the ban on cryptocurrencies. Look for there to be legal challenges filed against the ban from cryptocurrency traders in the country and platforms.
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