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Sambian central bank warns against risks with Bitcoin & Co

The Bank of Zambia (BoZ) issued a communiqué on 12 October on the status of crypto currencies such as Bitcoin in Zambia. According to the communiqué, although crypto currencies have some characteristics of money, they are not legal tender.

A recently published press release of the central bank allows us to take a look at the Zambian way of dealing with Bitcoin & Co. Among other things, the BoZ emphasises its monopoly on the issue of banknotes:

“The Bank of Zambia Act restricts the right to issue banknotes […] exclusively to the BoZ. Crypto currencies are not legal tender in the Republic of Zambia.”

Although trading in crypto currencies is not prohibited, the BoZ explicitly points out the associated risks. In addition it says in the communication:

“These risks include money laundering, terrorist financing activities and general consumer protection risks such as fraud and hacking, for which customers in most cases have no legal remedy due to the unregulated nature of crypto-currency related transactions.

Blockchain instead of land register

The statement is related to a recently signed Memorandum of Understanding between the Zambian Ministry of Land and Natural Resources, and Medici Land Governance., the blockchain offshoot of online trading, plans to introduce blockchain-based management software to facilitate land ownership registration in Zambia.

Like many other developing countries, Zambia has difficulties in establishing a functioning administration. Blockchain solutions are clear use cases for this. Projects such as those by Medici Land Governance could thus pave the way for the financial inclusion of developing countries. You can find out how a blockchain land register can work here.

An eye on the African Bitcoin regulation

Meanwhile, Bitcoin & Co. are enjoying growing popularity in many African countries. Interest in Bitcoin is particularly high in countries with dysfunctional currency regimes, as the money supply cannot be diluted. So it’s not surprising that the Zambian central bank is commenting on cryptos right now. For the country is heading straight for a crisis. Inflation has climbed to eight percent and the level of debt is rising steadily.

Whether the government will take similar drastic steps as its neighbour Zimbabwe is not clear from the central bank’s announcement. In Zimbabwe, the government put a stop to all Bitcoin activities in May.

However, the partnership with Medici Land Governance points to a more liberal attitude on the part of Zambia with regard to blockchain technologies. Furthermore, the last sentence of the communiqué in particular gives cause for optimism:

In line with the BoZ’s position that regulation should not restrict but enable innovation, the BoZ will continue to actively pursue all developments.

About Zambia

Zambia (Republic of Zambia) – formerly Northern Rhodesia – is a republic in southern Africa. It borders Angola, the Democratic Republic of Congo, Tanzania, Malawi, Mozambique, Zimbabwe, Botswana and Namibia. Their name derives from the river Zambezi.

As a developing country, Zambia wants above all to promote its economic relations and attract foreign investment. Zambia attaches great importance to its relations with its neighbours as well as with the major Western countries such as the USA, Germany and the former colonial power Great Britain, which are donors of development aid. The most important foreign policy reference point for Zambia in Africa is South Africa. An increasingly important partner is the People’s Republic of China, which invests in Zambia’s mining and energy sector.

Zambia is a member of the Southern African Development Community (SADC), the Common Market of Southern and Eastern Africa (COMESA) and the African Union.