This is a white paper on whether Bitcoin can succed in Africa specifically looking at Zimbabwe which currently has a multi currency regime and how the law of that country would apply

1. CRYPTOCURRENCY-CAN BITCOIN MAKE IT IN AFRICA- AN
ANALYSIS OF THE LEGAL FRAMEWORKIN ZIMBABWE
By Simbarashe Machiridza
Abstract
The emergence of cryptocurrency innovation on the financial scene has a
generated a lot of debate among regulators and conventional money market
players. With growth in use of such technologies as the blockchain, bitcoin has
become a regular practice in cities of the developed countries. Focus has
however, shifted to control and regulation of the digital currencies. While
bitcoin is extensively gaining momentum in the developed countries, low
income countries have lagged behind in the adopting this technology simply
because they don'tunderstand it, lack the interest or have not explored the
opportunities it can bring to the financial services industry. The current state of
bitcoin adoption in Africa shows only two countries, South Africa and Kenya
having made some inroads in understanding the technology. In these countries,
the regulators have allowed, in principle few players to pre-test the market at the
same time understudying the dynamics involved in implementing such
technologies. In the bitcoin world, Zimbabwe is often referenced as a unique
country with the fundamental structure to launch a relatively successfuldigital
currency. This paper reviews the potential for adopting bitcoin in Zimbabwe
with special emphasis on the legal regime and role of the State in regulating the
technology.
About the Author
Simbarashe Machiridza is a registered lawyer in Zimbabwe who has eight years
of experience in private practice and has also worked in corporateenvironment
and is now a full time consultant with Trajectory Consultancy, a consultancy
organisation that specialises in financial and commercial law in Zimbabwe.
INTRODUCTION
In February 2009 the Zimbabwean Government effectively abandoned its own
currency, the Zimbabwean Dollar and in the process liberalised its foreign
exchange regime to allow economic actors to use multiple currencies when
charging for their goods and services (commonly referred to as dollarization).
This move allowed the introduction of a multi-currency regime1.
On 11 June 2015 the Reserve Bank of Zimbabwe (RBZ) announced that it was
embarking on a demonetisation programme for the Zimbabwean dollar, a
1 See the Monetary Policy Statement Dated

2. process according to it had been due once the Country had adopted the multi-
currency regime.2 The said regime allows all persons to use currency of their
choice in day to day trade and in this regard “Zimbabwe seems to offer a perfect
microcosm or case study of what the Eurozone could have done. On this, it is
noteworthy that Zimbabwe is peerless in the drive towards the implementation
of multi-currency systems in an orderly and systematic manner”3. Currently the
list of allowed currencies under this regime has nine (9) international currencies
namely the South African Rand, the US dollar, the British Pound, the Euro, the
Chinese Yuan, the Australian Dollar, the Tswana Pula, the Japanese Yen and
the Indian Rupee4. The Government of Zimbabwe has repeatedly stated that this
currency regime will remain part of its financial policy for a while and that even
when times comes for the introduction of its local currency the said currency
would operate concurrently with the aforementioned international currencies5.
By introducing the multi-currency regime the Zimbabwe Government had no
option but to relax its exchange controlregulations6. The relaxation has been a
sustained policy decision7 and as recently as June 2015 the Reserve Bank
stated8 that it was re-orienting the Exchange Control9 by re introducing foreign
exchange bureau de changes that had been abolished10 as well as allowing
outward monetary transfer to people outside Zimbabwe11. One of the most
direct consequences of the introduction of the multi-currency regime has been
the limiting effect it has on the role and function of the RBZ in particular
reference to the its dealing with foreign currency and issuance of currency as it
2 See Press Statement issued on 11 June 2015 by RBZ Governor Mangudya –“Zimbabwe adopted the multiple
currency system or dollarization in 2009 and itis therefore necessary to demonetize the$ unit to replaceit
with the multiplecurrency system as was approved in the Finance(No 2) Act of 2009.The decommissioningof
the Z$ has therefore been pending and long outstandingsince2009
3 Zimdollar versus themulti-currency system –www.zimbabwesituation .com accessed on 18 June 2015
4 Directiverk 26/09 as read with January 2014 RBZ Monetary Policy Statement
5 On 6 August 2013 the then Governor of the RBZ issued a press statement in which he stated that “The multi -
currency regime will be with Us for the foreseeable future and in any case,when the time comes the local
currency will circulatealongsideother existingcurrencies with people exercisingtheir choiceof currency to
hold
6 See Exchange Control DirectiveRK39 dated 23 February 2009 as well as the Monetary Policy Statement
Issued on 25 August 2014
7 At page 313 of Short Term Economic Recovery Programme(STERP) Government stated that ‘In order to
remove restrictions on businesstransactionsGovernment deregulated restrictiveexchange controls and
delegated export administration and payment authority to banks
8 See The Herald dated 9 June 2015- “RBZ re-orients Exchange Control
9 “Morris Mpofu the Exchange Control Director at the RBZ stated that “We arere-orienting our systems so that
they facilitatebusiness.Our aimis to improve the ease of doingbusiness…and peoplegenerally don’t look at
control as an enabler to business….
10 They had been abolished on 30 November 2002 after the announcement by the FinanceMinister in his
budgetary statement – Joseph Noko at page 3 of his paper titled “Dollarization :The Caseof Zimbabwe” Cato
Journal Vol 31, No 2 (Spring /Summer)
11 S11 (1)of the Exchange Control Regulations SI 109/96 previously outlawed transfer of funds outside
Zimbabwe without the Exchange Control approval

3. is no longer being the author of a currency12 and in that regard “Zimbabwe is an
example of a sovereign country that no central bank that prints money”13. The
significance of this will be shown below.
Despite the introduction of the multi-currency the Zimbabwean economy has
been affected by liquidity crunch14 as well as low personal deposits into banks
as the citizens still do have full trust of the banks15. This has seen the emergence
and blooming success ofmobile cash transfers such as Eco cash and nett cash16
which however are not as cheap17. The RBZ has also called upon banks to
promote the use of non-cash based transactions such as point of sale18. Theses
variables have one unique feature- they are alternative forms of payment and
banking.
Currently Zimbabwe is the only nation operating a multi-currency regime in its
form and as such it offers an interesting position on having alternative forms of
payment. This should be taken in the context that when one looks at the
Eurozone the system is markedly different and the challenges the Eurozone is
facing are as a result of the fact that the Eurozone pins all its currency on the
Euro while in Zimbabwe the system is more open.19
Zimbabwe on paper offers an ideal platform for the introduction of
cryptocurrency as its currency set up is open. This point is made more pertinent
by the fact Zimbabwe does not have its own currency and therefore the fears
expressed by other Central Banks such as the Central Bank of China which
issued the Notice on Precautions Against the Risk of Bitcoins in which they
stated that bitcoin was a “virtual commodity” and by its nature is not a currency
and should not be circulated and used as a currency20. Or as the Russians have
stated that the use of cryptocurrency in their country is illegal in that it seeks to
12 S41 of the Reserve Bank Act (Chapter 22:10) ‘the Bank shall havethe solerightto make or causeto be made
and to issuebank notes in Zimbabwe
13 See 4 above
14 See page 6 of the January 2014 Monetary Policy Statement wherein the Acting Governor of the RBZ stated
that Zimbabwe has “a severe and persistentliquidity crunch which has made itvery difficultfor local
productive sectors to access sufficientcreditto oil the wheels of our economy.”
15 See page 9 of Mappingthe Retail Payment Services Landscapeof Zimbabwe by FinMark TrustAugust 2012
where it is stated that “ … a potentially significantpopulation chooses notto operate in the formal financial
systems as they no longer trust formal financial institutions to protect their funds
16 See page 22 of FinMark report supra
17 For instanceto receive send $50 to a subscriber onehas to deposit $53 in their Eco cash account.
18 See point 112-113 of Monetary Policy Statement of January 2014
19 See Zimdollar versus Multicurrency supra
20 Regulation of Bitcoin in Selected Jurisdictions- Library of Congress. www.ioc.gov/help/bitcoin- accessed on
9/6/15

4. introduce a new currency outside the purviews of their laws21. These do not
apply to Zimbabwe as it does not produceits own currency.
Key Question
Can cryptocurrencybe recognised as a currency in Zimbabwe or as alternative
payment system?
Historical Background
For this question to be answered a brief understanding of the history of
Zimbabwe is necessary. Zimbabwe was a British colony having been fully
colonised around 1880. Zimbabwe attained its independence in 198022. The
constitution adopted at independence commonly known as the Lancaster House
constitution23 provided that the law applicable in Zimbabwe would be the law
applicable at the Cape of Good Hope on 10 June 189124. The said law
incorporated British law as well as Roman Dutch law.
The Commercial aspectof the law in suchareas as banking, insurance and
mercantile law draws from British common law and legislation and as such
guidance is obtained from the British legal system.
Due to the challenges it faced in the post2000 period after the collapse of its
stockmarket and a run of investors and continued drain on foreign currency
reserves with minimal investment25 the regulations dealing with foreign
currency tightened over the years for example bureau de changes were
abolished26 limiting licences to deal in foreign currency to banks27 and the value
of the dollar deteriorated at a rate that could not be controlled28.
So having endured a period of stringent exchange controlregulations as
well as having a back ground of law tainted by British law can this nation
continue its liberalised stand point and acceptthe new form of virtual
currency?
It should be clear from the onset that Zimbabwe is a third world nation and as
such its rate of technological development is far from ideal but it boasts of
21 See 20 above
22 www.wikipedia.org/wiki/history
23 This Constitution was to be abandoned in June 2013 when a new constitution (Constitution of Zimbabwe
Amendment (No.20) Act 2013) was adopted after a referendum in Zimbabwe.
24 S89 of the old Constitution (SI 1979/1600 of the United Kingdom)
25 Accordingto Joseph Noko supra at page 4 Foreign DirectInvestment fell from $400 million in 1998 to $30
million by 2007
26 See 11 above
27 Joseph Noko supra at page 3
28 By November 2008 monthly inflation was pegged at 79, 600,000,000.00%see Joseph Noko supra at page 9

5. having one the highest adult literacy rates29 and in the past five years access to
the internet has increased due to the expansion of the mobile network system.
According to Wikipedia as of January 2014 approximately 40% of Zimbabwe’s
population are internet users which is a significant rise from the 0.4% in 2000
and 15.7% in 2011. Official figures from Postaland Telecommunications
Regulatory Authority of Zimbabwe (POTRAZ)reflect that the total number of
mobile subscribers stand at about 11 798 65230 and this is taken from a
population of 13.6 million is quite telling.
The Zimbabwean Legal Framework
The Zimbabwean banking sector is governed by multiple statutes extending
from the Reserve Bank of Zimbabwe Act (Chapter 22:15) to the Banking Act
(Chapter 24:20), the Exchange Control Act (Chapter 22:05) as well as the
Exchange Control Regulations SI 109/06. The payment system is governed by
the National Payment Systems Act (Chapter 24:23) while criminal conductis to
an extent outlined by the Promotion of Bank Use and Suppression of Money
Laundering Act (Chapter 24:24). It is through this framework that the financial
sectoris regulated in Zimbabwe. The judgements of the superior courts of the
land in particular the High, Supreme and Constitutional Court31 offer guidance
in the interpretation of common law principles as well as statutory provisions in
banking and commercial law.
The key issue or question is whether the current legal framework poses a
hindrance to the establishment of bitcoin in Zimbabwe. Cryptocurrencies have
been defined as electricity converted into lines of codewith monetary value i.e
digital currency such as Bitcoin. “Generally speaking Bitcoin is two things
1. a payment network- Bitcoin
2. the current unit used on that network-bitcoins”32
Zimbabwe has no clear regulation of e-commerce or electronic banking as aptly
stated by Alfred Bimha in his project on the Impact of Electronic banking33,
“The Reserve Bank of Zimbabwe has not significantly taken care of electronic
banking and put stringent operating rules of it in Zimbabwe. This is seen by the
nonexistence of legislature to cater for electronic banking and even electronic
29 Accordingto the FinMark Trustpaper supra at page 8 the literacy rate in Zimbabwe is exceptionally high at
90%
30 http://www.techzim.co.zw/2015/04-Zim-telecoms-stats-from potraz-show-decline-in-mobile-revenue-
internet-penetration/
31 Set up in terms of s170,168 and 166 of the new constitution
32 What is bitcoin?- Welcometo Cryptocurrency by Erik Voorhees
33 Alfred Bimha The Impactof Electronic Bankingon the Supervisory and Regulatory Systems in Zimbabwe

6. commerce”34. The Reserve Bank in its January 2014 Monetary Policy
Statement stated its intention to come up with an electronic payment system
regulation35 to date no such regulation is in place. The immediate question is
then how a nation without a guiding legal framework can deal with a
cryptocurrency such as bitcoins. The answer is it’s not really an issue as even
the advanced economies with all sorts of electronic banking regulation and
supervision equally do not a clear legal framework to deal with Bitcoin and are
in any event seized with the notion of protecting their own currencies a
challenge Zimbabwe does not seem to face.
The fact that Bitcoin is a payment system as stated above having a currency unit
means for Zimbabwe three key legal instruments come into play, namely the
National Payment Systems Act, the Reserve Bank Act as well as the Exchange
Control Regulations.
Applicability of the NationalPayment Systems Act
This Act provides basic guidance in the setting up and operations of payment
systems. For a payment system to be recognised by the Reserve Bank it should
have the following objects as set out in s 3(1) of the Act;
a. clearing of payment instructions between financial institutions
participating in the system
b. the settling of obligations arising from the clearing of payment
instructions whether through,
i. netting of the obligations
ii. set off
iii. individual settlement of each credit transfer or payment instruction
c. discharge through a settlement system established by the Reserve Bank
The Act in s18 prohibits the making of payments or settling what is due
to third parties by any other personor institution other than a participant
in a recognised payment system.
What is key however is that the Act defines a financial institution as a
banking institution registered in terms of the Banking Act or any other
institution that lawfully engages in banking activities.36
34 Bimha supra at page 4
35 Para 118
36 S2 of the Act

7. It is contended that bitcoin based companies can thus be set up or operate
in Zimbabwe as registered companies/entities and can apply for the
recognition of their payment system. The recognition of the payment
system is not hard and fast as the Act authorises the Reserve Bank to
recognise payment systems for different classes of financial institutions,
different areas of Zimbabwe, different classes of payment instructions37.
The significance of this is heightened when one takes into accountthat
payment instructions are defined in the Act to also mean instructions
made by electronic means.38
The issue the Bitcoin community might have with this set up is that the
supervision and regulation they pride their system not to have will not be
in existence as the Central Bank will have a role to play in the set up and
consequent administration of payments between entities39. This however
should not prove to be a deterrence as the movement towards regulation
of Bitcoin is there on a global level and this regulation will be less
stringent in Zimbabwe for the moment due to the absence of a clear
regulatory mechanism as stated above. Depending on the venture Bitcoin
companies might seek to establish in Zimbabwe if the terms of this Act
should be accepted as being applicable then partnerships with banking
institutions will be inevitable40.
Through the provisions of S20 (1) of the Act the RBZ has set up the
National Payment Systems Department (NPSD) which oversees the
development of payment systems, their infrastructure and the setting up
of rules and regulations. The NPSD has proactively sought to encourage
innovative solution for payment services modernisation41.
Taking a cue from the pro modernisation of the payment systems by the
RBZ the introduction of Bitcoin and its related computer technology
would be an ideal evolution of the payment systems in Zimbabwe, more
so when one considers that bureau de changes are being reintroduced in
the country. The only apparent challenge in the establishment of Bitcoin
as a payment system in Zimbabwe is the requirement that the non-
37 S3(2) of the Act
38 S2 of the Regulations
39 “with Bitcoin ,there is third party watchingover the participantsof economic activity,approvingtheir
conduct and charginga fee to do so” Erik Voorhees supra
40 See FinMark Trust report supra at page 16 were it is stated that non-bankingentities have to work with a
bank
41 See FinMark Trust supra at page 22

8. financial institutions have to partner a bank for it to operate. Considering
that “many Zimbabweans are making the conscious decision to avoid
banks especially for savings”42 it is prudent to actively lobby for the
removal of this particular provision of the law to enable full
establishment of Bitcoin as a payment system in the country.
Relevance ofthe Exchange Control Regulations and the Reserve
Bank Act
If on paper the Bitcoin system can be adopted in Zimbabwe as discussed above
the other pertinent issue is whether the currency unit bitcoins can be recognised
as a currency in Zimbabwe. In terms of s40 of the Reserve Bank Act the Central
Bank is authorised to issue currency. This is no longer applicable as the bank is
not making its own currency as previously stated. The key aspect in Zimbabwe
will be how bitcoins will be treated i.e. will they be seen as a currency or not. In
terms of the Exchange Control Regulations foreign currency is defined43 as a
foreign currency note or coin. A foreign currency document means a bill of
exchange, traveller’s cheque, letter of credit or other document which is issued
in or outside Zimbabwe to enable the personto whom it is issued to obtain
directly or indirectly any foreign currency note or coin from some other person
on the credit of the personissuing the document. A foreign currency note or
coin means any currency other than Zimbabwean currency which is legal tender
in a country other than Zimbabwe.
To the extent that bitcoins have been recognised as legal tender in certain
jurisdictions such as Germany44 and with guidance from Brazil45 it can be
argued that for purposes ofZimbabwe bitcoins are foreign currency and as such
their use and operation should be permissible at law. The Reserve Bank will
however have to make some formal statement of recognition to enable
unhindered use in the nation.
Conclusion
The position adopted by Government of Zimbabwe46 that it is important to
allow economic actors to use whatever currencies are convenient for them to
42 FinMark Trust supra at page 35
43 S2 of the Regulations
44 Germany recognises bitcoins aslegally bindingfinancial instruments as provided in s1(11) of the German
BankingAct as they areconsidered units of accountand such arerelated to foreign currency.
45 In 2013 Brazil enacted Law No 12 865 which created the possibility of the normalisation of mobilepayment
systems and the creation of electronic currencies
46 Para 309 of STERP

9. transact in has enabled divergent payment systems to come to the fore in
Zimbabwe including mobile payment systems however there is still room for
the continued innovation to enable currencies such as bitcoin to function in
Zimbabwe. The laws currently in place permit the application of the said
currencies should the authorities adoptan open interpretation of the provisions
of the law as has been attempted above. The combination of the environmental
factors (wherein a large number of people who are exposed to the internet but
are hesitant to use banks) as well as the law of the land provide in ideal scenario
for the setup of bitcoin based companies in Zimbabwe as “the use of the multi-
currency system tends to eliminate the risk of exposure to sudden, sharp,
devolution of currencies since consumers are free to switch from one currency
to the other with relative ease. This results in competitiveness on the part of the
Country”47.In any event Bitcoin offers a more convenient and costeffective
method which would make it attractive to the citizens who desperately need an
alternative payment mechanism to the ones currently in place48.
47 See Zimdollar versus Multicurrency supra
48 See page 17 of the FinMark report supra were itstated that “it is likely thatin the shortto medium term any
new electronic payment channels will only besuccessful if they providea convenient and affordableway to
reliably access cash”