Cryptocurrency exchange Golix has filed a lawsuit against the Reserve Bank of Zimbabwe, saying that the bank’s action in issuing a decree on 11 May 2018 banning all cryptocurrency activity was illegal.
Golix filed the lawsuit against the Reserve Bank in the High Court of Zimbabwe. Golix is one of three cryptocurrency exchanges that are active in Zimbabwe, the other two being Bitfinance and Styx24.
The lawsuit argues that the Reserve Bank of Zimbabwe has no jurisdiction to ban cryptocurrency, since that is equivalent to lawmaking which is something only the parliament can do. It argues, therefore, that the Reserve Bank of Zimbabwe is usurping parliament’s power with this action. The lawsuit also mentions that the Reserve Bank couldn’t even manage their own local currency, the ZWL, so they have no right in general to make decisions regarding any form of currency.
Zimbabwe is notorious for the hyperinflation which destroyed its currency, the Zimbabwean Dollar (ZWL), and the same Reserve Bank of Zimbabwe which is banning cryptocurrency was largely held responsible for the crisis.
Essentially, the bank was accused of printing money at will to pay all of its debts, including for funding a war in the Democratic Republic of the Congo. The inflation rates became so extreme that the Zimbabwe fiat currency lost all of its value almost overnight. In November 2008, inflation hit an unfathomable 79.6 billion % per month, and eventually, the ZWL was completely abandoned in 2015.
Foreign currency replaced the ZWL in Zimbabwe, with 90% of currency exchange activity in the country occurring via the USD. Even though USD is the most widely used currency in the country, it is very hard to obtain and usually has to be purchased on the black market illegally.
One new way to obtain USD was through a Bitcoin ATM that the Golix cryptocurrency exchange installed in the capital Harare in March of this year. It dispensed USD for Bitcoin, a rare way for Zimbabwean citizens to get USD outside the black market.
Although cryptocurrency is obviously a very positive development for Zimbabwean citizens who have had to live with hyperinflation, since it provides a store of value which the government cannot manipulate and facilitates obtaining stable and valuable fiat currencies like USD, the government of Zimbabwe is trying to ban it anyways via the action of the Reserve Bank.
The decree banning cryptocurrency states that all financial institutions and banks must halt all cryptocurrency-related activity within 60 days, and the order was thorough in banning any and all cryptocurrency activity even by individuals.
Unfortunately, some customers trying to sell Bitcoin and withdraw cash to their bank accounts are finding that it is no longer allowed, even though there is supposed to be a 60-day grace period from the issuance of the decree so that people can get their affairs in order.
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