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Blockchain Technology

6.5.2  To Proffer a Cryptocurrency Regulatory Framework

for Zimbabwean Markets and Users

Cryptocurrencies have three main characteristics of design and operation that present

significant challenges to their regulation. These are decentralization, global presence,

and diversity in current and potential users. Decentralization means that there is no

central authority or control of the system, as it is a distributed network that exists on

the internet. The regulation of cryptocurrencies calls for a common approach, as any­

one can have access and transact from anywhere in the world based on internet con­

nectivity, thus rendering piecemeal approaches futile. Furthermore, due to the diverse

range of stakeholders in the cryptocurrency ecosystem, it would be prudent to ensure

that regulation to support one player should not adversely affect the operations of

another. It is almost impossible under the current system to regulate a cryptocurrency

network such as Bitcoin. It is, however, possible to regulate the operations of players

in the Bitcoin ecosystem. These players are dominated by exchanges, users and min­

ers. Regulating users is again a challenge, since anyone can download a virtual wallet

and use it to send and receive cryptocurrencies. It is, therefore, impossible to know

who owns a wallet and how much cryptocurrency is stored in the wallet.

In light of the foregoing, it is recommended that cryptocurrencies be the main

focal point in regulation. The RBZ should introduce a regulatory framework ensur­

ing that all cryptocurrency exchanges are registered and licensed with RBZ so that

they can be subjected to regular inspection. Second, it should be mandatory that all

cryptocurrency exchanges maintain a history of transactions for their users. This

may be achieved by applying a “know your customer” framework before opening

accounts for cryptocurrency users.

Third, as part of regulations, customers’ funds must be separated from the

exchange’s funds. Minimum capitalization requirements may be applied to act as a

form of deposit protection fund.

Fourth, it should be mandatory for exchanges to be audited by an independent

auditor periodically so as to conform to minimum capital requirements.

Fifth, as per its residual responsibility, the government should add value added

tax on all cryptocurrency profits made; in that way, the state may benefit from the

underworld of cryptocurrency and blockchain.

Sixth, there is a need to declare cryptocurrencies a digital asset and form a com­

mission to regulate and oversee its trade.

Furthermore, there is a need to form a self-regulating body of cryptocurrency

exchanges that will proffer suggestions on a code of conduct as well as coming up

with standards and best practices, including guidelines for legal recourse for users.

Last but not least, RBZ should push for regional and international coordination of

cryptocurrency regulation, as this cannot be a one-man show.

6.5.3  Recommendations for Future Research

Future studies are recommended on the best implementation matrix for cryptocur­

rency and blockchain usage in Zimbabwe. Further research needs to be done on

cryptocurrency regulation with a view to a regional as well as global approach to