An Interrogation into the Regulatory Challenges of Virtual Currencies on the Zambian Economy

Abstract

Virtual currencies (VC’s) also known as crypto currencies and particularly Bitcoin have been deliberated globally as having the potential to disrupt the way financial services currently operate. They bring about secure, always available, peer to peer and decentralized payment methods that have some distinct advantages over the traditional methods of payments. Virtual currencies (VC’s) are a variant of digital assets that are designed to operate as a medium of exchange that makes use of very strong encryption and cryptographic algorithms in order to secure financial transactions at lower transaction fees and eliminates the need for a central intermediary such as an exchange, central Bank or a clearing house. The initial set up costs for these virtual currencies are usually cheaper than traditional brick and mortar banking services because they make use of already existing internet and telecommunications infrastructure. Africa and Asia are flourishing at these initiatives as these financial services are believed to greatly benefits the underserved in the near future. This study interrogated the current regulatory challenges of virtual currencies and the inadequacies of the current banking, financial and ICT regulations in Zambia. This study further compared Zambia’s regulatory challenges on virtual currencies with similar jurisdictions in other world Bank Findex ranked developing countries in Africa. Currently, there is a lot of virtual currencies publicity and activity going on in Zambia and citizens are currently trading in these virtual currencies through peer-to-peer using social media platforms and websites. Regrettably, the illiteracy surrounding virtual currencies are not just for general public because they are also found among the people who are charged with the mandate of regulating the financial systems landscape and fighting cybercrimes which may have its background in the utilisation and misappropriation of these crypto currencies. The regulators are currently playing catch up and only issuing cautioning statements to citizens on the risk of these virtual currencies instead of exploring exhaustive research and development to get the most out of these technologies. The research results will aim towards comparing the current state of virtual currencies and the rate of adoption and usage in Zambia. The study will further provide recommendations on the need for virtual currency policies and regulations that are consolidated, interoperable and harmonized between different financial, ICT and consumer protection regulators to avoid restrictive regulations that might stifle and kill digital financial services initiatives and allow for continued innovations, growth and adoption of the virtual currency landscape in Zambia.