Zambia is just making its entrance into the blockchain space. However, the Southern African country is taking a different approach. The Zambian central bank has declared that cryptocurrencies aren’t legal tender. The decree which was issued on October 12 cautioned those transacting in digital currencies as they will have no one but themselves to blame if the market should fail. Also, the Central bank of Zambia is trying hard to promote the value of its local currency, the Kwacha which appears to be depreciating in value.
Similar to most African countries, the Bank of Zambia (BoZ) does not have any authority nor regulatory framework over cryptocurrency investments or trading. For the BoZ to have any say over the cryptocurrency industry, it would need legal backing. This means that the parliament will have to amend the law to enable the BoZ have any authority over the cryptocurrency industry.
The Zambian central bank issued a statement on Friday warning people about the risk of investing in cryptocurrency. The BOZ claims that it has observed the alarming rate at which interest in cryptocurrencies is growing through the enquires they have received on the subject. The statement released by the BOZ explained that although cryptocurrencies have some of the characteristics of money, such as being used as a means of payment, cryptocurrencies are not legal tender in Zambia.
The statement explains that the interest of the people and the integrity of the financial system in Zambia had to be maintained. The BoZ listed the following as the reason why cryptocurrency cannot be considered legal tender. For one, the BoZ bears the exclusive rights to issue notes and coins in the country according to Section 30 of the Bank of Zambia Act. Since the BoZ has not issued any cryptocurrency, they cannot be classified as legal tender.
Also, since the BoZ does not have a regulatory framework for cryptocurrencies, “the usage of cryptocurrencies are performed at owner’s risk.” The BoZ went on to list the risks associated with cryptocurrency usage. It adds, “Some of these risks include money laundering, financing activities of terrorism and general consumer protection risks such as fraud and hacking, to which in most cases, no legal recourse would be available to customers due to the unregulated nature of cryptocurrency-related transactions.”