The Golix bitcoin ATM took on obvious importance when it was first introduced in the Zimbabwean capital Harare, early April. In a country without a currency of its own, where conventional automated teller machines (ATMs) have become useless due to a severe cash crisis, the bitcoin machine was seen as the new gateway to faster cash transfers and cash availability. Now, it is a ‘white elephant’ – unused and redundant. But Golix trudges on.
A Digital Cash Machine Without Cash
The ban on cryptocurrencies issued by the Reserve Bank of Zimbabwe (RBZ) in May of this year upset ambitious plans by Golix, the Southern African country’s biggest digital currency exchange, to mainstream virtual money, and to its bitcoin ATM – a novelty at the time – hardly four weeks after it had come online.
Today, the machine no longer dispenses cash, or facilitates any trades at all, even though it can still be seen in the Golix offices in central Harare. There is no point, after all, to have on display a little piece of furniture if there is uncertainty about the future of cryptocurrencies in the country.
Golix spokesperson, Nhlalwenhle Ngwenya, refused to comment about any operational issues, claiming such matters were still under litigation. The exchange is challenging the RBZ ban in the Zimbabwe High Court, a case still pending. But at the time the ATM was activated in April, Golix said:
After realizing that the public is still struggling to understand or in some cases access bitcoin, we felt that the bitcoin ATM would be a huge and necessary step towards engaging people on how they can use cryptocurrencies for their daily business.
Crowning Moment Shattered
The Bitcoin machine was, perhaps, the Harare-based trading platform’s crowning moment since it became Zimbabwe’s first digital currency exchange in September, 2015 with only a handful of trades. By the time of the ban in May, Golix had traded more than $20 million worth of bitcoin. Its reported revenue climbed 6,200 percent to $158,000 at the end of last year. About 50,000 people were actively trading bitcoin, bitcoin cash, litecoin, dash and ethereum on the platform in May, compared to a few dozen customers two years earlier. Things were looking pretty good until the Reserve Bank of Zimbabwe announced an unexpected ban on cryptocurrencies.
Virtual money had long operated under a cloud of uncertainty, but the RBZ move at the time suggested they were entering a dark, unpredictable phase. They have. Often, investors look at digital currencies as an investment. But the RBZ’s chokehold on limited foreign currency means that some Zimbabweans had started to use cryptocurrencies to pay for goods and services abroad – like school fees, health bills or car imports. Golix was their intermediary. And the central bank didn’t like that. It accused Golix of mimicking banking activities by accepting deposits, something they weren’t allowed to do because, one – the exchange was not a bank, and two – it wasn’t licensed to do so. The RBZ pointed to Golix’s, or any other crypto exchange, ability to transfer cash across borders like a remittance company, without its approval and, obviously, control, as perhaps the highest form of mischief and anarchy.
Cut All Ties
On May 11, RBZ governor John Mangudya ordered banking institutions that were offering services to Golix and the other Zimbabwean exchange, Styx24, to cut all ties with the crypto exchanges within 60 days. The banks were a lot swifter in their responses and severed ties within days of the instruction. Panic ensued and there was a run on Golix deposits. A ban had taken effect, albeit through the backdoor.
This is the ban that has taken cryptocurrency investors in Zimbabwe away from centralized, stable exchanges to social media forums like Whatsapp and Facebook, where the risk of theft, loss and fraud is significantly higher – apparently anathema to the central bank’s intentions. A ban that has frustrated Golix’s maiden token sale of $32 million in July, an offer floated in defiance of the ban, was itself seen by pundits as having clearly spooked the RBZ into the prohibition in the first place.
Keen to conquer Africa, the Golix issue, which was released outside Zimbabwe and closed July 25, was under-subscribed by 35 percent. The idea (to defy the ban) was, ostensibly, to portray a-business-as-usual atmosphere to fresh-faced investors in South Africa, Kenya and Uganda, where the exchange had just opened an office and started to promote the Golix token, and also to prove a point to the conservative Zimbabwean financial regulators, who had made trading in Golix’s primary market virtually impossible, that the business could still flourish elsewhere.
Looking For a Way Out
Today, the Golix office in Harare is still open, manned by a threadbare staff, but only to manage its growing presence in Africa, and in anticipation of a favorable outcome of the case in the High Court, whose hearing date has yet to be set. The exchange continues to make noise about its new GLX token on social media, while sidelining issues around repaying Zimbabwean investors and the thousands of dollars it owes them, both in real cash and cryptocurrency, since its bank accounts were frozen with the ban in May.
Ngwenya, the exchange’s spokesperson, refused to discuss the matter, citing the pending court challenge. But some investors are starting to express concern: “I have had no explanation besides an email saying they (Golix) will provide updates… and they have been quiet since,” complained an investor, who had just $70 worth of bitcoin left on the platform at the time of the ban.
On paper, cryptocurrency withdrawals would have been the easiest thing to do because Golix keeps some of the coins in their hot wallet – a kind of live online purse that allows for instant cryptocurrency transfers. And those in the cold storage – the offline wallet, where the majority of crypto is stored, shouldn’t be difficult to transfer to investors. The RBZ ban affected fiat withdrawals, not crypto.
Do you think financial regulators in Africa will allow cryptocurrencies to flourish unhindered? Let us know what you think in the comments section below.
Images courtesy of Shutterstock.
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