Cryptogem Global, a new peer-to-peer bitcoin (BTC) exchange, has opened in Harare in defiance of the Reserve Bank of Zimbabwe’s ban on cryptocurrencies. The decentralized platform allows Zimbabweans to buy and sell BTC without the need for intermediaries such as legacy financial institutions.
A Globalized Cryptocurrency Exchange
“Cryptogem Global is a … bitcoin trading platform where people around the globe can exchange their local currencies and e-money to bitcoin,” Melissa Mwale, co-founder and chief executive officer of Cryptogem Global, told news.Bitcoin.com.
Mwale said the idea is to create a borderless platform that will not limit trades to a particular country. Offering an example, she explained that the company aims to provide a service that will allow “someone in Zimbabwe to buy from someone in the U.K. using Paypal, Skrill or Western Union.”
For some time, virtual currencies have operated under a cloud of uncertainty in Zimbabwe. But the ban on cryptocurrencies — announced by the Reserve Bank of Zimbabwe in May — pointed to the start of a dark and unpredictable phase, as it crippled the operations of the country’s only two digital currency trading platforms, Golix and Styx24. Ever since, bitcoin trades in the southern African country have gone underground or shifted to social media platforms like Whatsapp, where the risk of theft or fraud is significantly higher.
The Reserve Bank of Zimbabwe, the country’s central bank, essentially lacks the power to shut down cryptocurrency exchanges, which have been accused of providing unlicensed banking services, in violation of the Exchange Control Act. But the law does not allow it to ban cryptocurrencies, either. An earlier attempt by the Reserve Bank of Zimbabwe to directly close down Golix was quashed by the High Court, which ruled that John Mangudya, the governor of the central bank, did not have jurisdiction over the country’s crypto-landscape.
Instead, the central bank shut the exchanges down by proxy, through commercial banks, over which it yields full control. It ordered the banks to close accounts belonging to Golix and Styx24, effectively cutting off their air supply. And with that, all centralized digital currency trading activities effectively ceased in the country.
Defying the Ban
But Cryptogem is defying this backdoor ban in a particularly clever way. The P2P bitcoin exchange does not have any bank accounts, so the central bank can’t shut them down.
“Cryptogem does not have any bank accounts in Zimbabwe,” said Mwale, who has seen 300 new registrations on the platform within its first week, with total trades reaching about $2,000. Transaction fees average 0.9 percent for offers and 0.00005 BTC for deposits and withdrawals. She added:
There is actually no need for a bank account at the present moment, though we are registered fully as a private limited company in Zimbabwe. We don’t work with banks directly as we do not handle any fiat currency. And if you noticed, the (central bank) ban was mainly directed to using banking services by exchanges.
However, the new exchange will be encouraged by Mthuli Ncube, Zimbabwe’s new finance minister. He has spoken positively about cryptocurrency and blockchain technology.
“I think the attitude for Zimbabwe should be to invest in understanding (digital assets) innovations,” said Ncube, a professor of economics, in an article published in September. “Often central banks are too slow in investing in these technologies.”
To trade on Cryptogem, one typically has to make a BTC deposit, offer and wait for bids that match the required price, or one that is favorable to them. Once a buyer shows interest, both buyer and seller are redirected to a private live chat on the exchange where details of the transaction, including payments, are finalized. The exchange then releases the BTC to the buyer, after holding it in escrow, once the seller confirms payment. News.Bitcoin.com tested the Crypotogem bitcoin-only interface in a $5 deal, which concluded smoothly within minutes.
The price of bitcoin on the exchange is significantly inflated, at between $20,000 and $24,000, which reflects exchange rate volatility. Current Zimbabwean bitcoin core prices appear to track the U.S. dollar black market rate, which is priced at three different levels depending on how the payment is made: by bank or mobile transfer, paper notes, and/or coins. Each dollar costs about three times as much for the cash transfer by bank or mobile phone of Zimbabwe’s substitute currency, known as “bond notes,” which the authorities claim is 1:1 with the U.S. dollar.
In a market that is sometimes plagued by fraud and the theft of investor funds, security is key. Mwale said that all accounts are secured with two-factor authentication.
“Only a very minimum amount of funds are kept online (hot wallet) just to facilitate quick withdrawals,” she added. “On application security, we have third-party security auditors that come in and audit security in our core application. Our server information is hidden from the public, it’s behind a firewall provided by one of the industry leaders in this regard.”
What do you think about the new P2P exchange in Zimbabwe? Let us know in the comments section below.
Images courtesy of Shutterstock.
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