Zimbabwean cryptocurrency exchange Golix has gone to court to challenge the central bank’s cryptocurrency ban. The suit claims that the central bank did not have such powers and therefore the order is unconstitutional.
Golix is now asking the high court to set aside the central bank directive.
“The ban in effect outlaws and classifies as illegal Applicant’s operations,” the application said. “The Respondents are in fact purporting to classify the trade in cryptocurrency as illegal,” the application went on to say. According to Golix, the ban amounts to law-making, a function that can only be performed by parliament.
Governor John Mangudya and the Reserve Bank of Zimbabwe have been cited as respondents.
The Reserve Bank of Zimbabwe banned all banks from processing cryptocurrency transactions on May 14. Governor John Mangudya said the central bank had not licensed cryptocurrency trading and that investors did not have the protection of the law.
“The Reserve Bank has directed all banking institutions not to provide banking services to facilitate any person or entity in dealing with or settling virtual currencies,” he said in a statement.
The regulator had also warned the public against engaging in cryptocurrency trading as they could lose their investments.
The RBZ then wrote a letter to Golix ordering it to shut down operations. Golix’s order book has been taken down and no trading is taking place.
The central bank had initially given banks a 60-day window to stop providing bank accounts to cryptocurrency trading platforms.
“Please note that we have temporarily taken down the exchange’s orderbook. Any developments related to this matter will be frequently updated,” Golix sent out a message to its users on May 23.
“All cryptocurrency exchange houses operating in the country, including Bitfinance (Private) Limited (also known as Golix), are required to cease all virtual currency exchange operations,” RBZ registrar Norman Mataruke wrote on May 15.
The central bank had said the pseudonymous nature of cryptocurrencies raised regulatory concerns and posed risks to “public and financial stability.”
The anonymity of the transactions could also result in exchange control circumvention as “the transfer would not be effected and reported by an authorized dealer in foreign exchange.”
In the letter, Mataruke said all exchanges were “required to take all the necessary steps to close the cryptocurrency accounts or ‘wallets’ of your customers and to make good any funds currently held on behalf of customers” trading and investing virtual currencies.”
Bitcoin was trading at a premium on the platform averaging about $12500 when it was suspended. Zimbabwe’s economy is in tatters after economic sanctions were imposed during the reign of the former president Robert Mugabe.
The Zimbabwean dollar faces huge inflationary each passing day and people have resorted to cryptocurrencies to cushion themselves. The previous government of Robert Mugabe even encouraged the trend perhaps hoping it could help circumvent international sanctions and alleviate the currency crunch.
Only two cryptocurrency exchange platforms existed before the ban was announced. Golix recently installed a bitcoin ATM machine in Harare that could be loaded with US dollars.