- Zambia has taken its first step towards joining the cryptocurrency-friendly countries in Africa
- The project which involves the Securities Exchange Commission and the Bank of Zambia is being worked on with DLTLedgers
- DLTLedgers will create a blockchain-based system that monitors and regulate cryptocurrency transactions
Zambia technology and Science Minister Felix Mutati announced that the Southern African country is testing blockchain-based technology to regulate cryptocurrency. The project which involves the Securities Exchange Commission and the Bank of Zambia is being worked on with DLTLedgers. Zambia which has experienced many positive changes in recent years seeks comprehensive crypto regulation as it sees cryptocurrency as an opportunity for attracting investment.
Zambia has created magnetism that attracts investments and it is one of the countries in Africa that is becoming a must-be place for investment- Minister Felix Mutati
There is no specific legislation or regulation in Zambia that prohibited or explicitly permitted the use of cryptocurrencies. However, the Bank of Zambia (BoZ), the country’s central bank, issued a warning in 2018 cautioning the public about the risks associated with the use of virtual currencies, including their potential use for money laundering and other illegal activities.
In addition, the BoZ stated that it does not recognize cryptocurrencies as legal tender and does not oversee or regulate their use. This means that the use of cryptocurrencies in Zambia is not currently regulated by any government authority and users should be aware of the risks involved. This amounts to an implicit ban on cryptocurrency in the country.
Zambia joining crypto progressive countries
Zambia has taken its first step towards joining the cryptocurrency-friendly countries in Africa. At last reckoning, there were 7 African countries that had progressive attitudes toward cryptocurrency. Namibia joined the party by allowing crypto settlement between willing parties. Now Zambia is in the early stages of joining the progressive countries.
Zambia’s cautious approach could be worth noting
Cryptocurrency has moved very fast. Faster than regulators. While there are currently efforts to regulate cryptocurrency the focus has largely been on the legal aspects. The UK and South Africa are two good examples of this. Of course, the legal framework is important but it is only as effective as the ability to both detect and enforce it. That’s where the technology comes in.
How are we detecting breaches of cryptocurrency regulation laws? South Africa’s regulation on advertising is decidedly easier to police than breaches in cryptocurrency dealing and trading. Is there technology in place to detect these breaches? Secondly, how do we enforce the consequences if we cannot detect the breaches in the first place? At best we will replicate the problem of traditional finance which is recurring cycles of unchecked breaches, followed by a financial crisis. This crisis is then met with heavy regulation. Sadly this regulation is behind the curve and never enough. This is only realised in the next financial crisis.
Partnership with DLTLedgers
DLTLdgers is a blockchain startup that develops supply chain solutions. They have previously done work in supply chain management, trade finance and digital identity. They have experience in developing solutions for both the private sector and public sector institutions. DLTLedgers will create a blockchain-based system that monitors and regulate cryptocurrency transactions. Giving the government the ability to track the movement of cryptocurrencies.
The system if successful will satisfy many important goals of regulation including anti-money laundering and counter-financing for terrorism. In addition, such monitoring ability will allow the government to tax cryptocurrency transactions. Given the size and growth of cryptocurrency, the Zambian government would certainly welcome the tax revenue.
The use of blockchain technology to monitor cryptocurrency transactions also comes with added advantages, particularly in the ability to protect citizens. This is something the current regulatory infrastructure, or lack thereof, has failed to do. Whether from loss due to lack of knowledge or bad actors.
This is a development well worth watching as it may inform the cryptocurrency regulation conversation going forward.