- Investor faith in cryptocurrencies has been destroyed by the collapse of FTX, a $32 billion cryptocurrency exchange
- Zimbabwe is now considering ways to implement a central bank digital currency (CBDC)
- Global regulators are tightening crypto regulations in response to a wave of business failures brought on by the continued decline in the value of digital assets
Harare-The introduction of a central bank digital currency in Zimbabwe initially seemed thrilling, but with the surge in cryptocurrency fraud and failure, it is now clear why the RBZ is gradually postponing the move. The RBZ laid out a roadmap for the implementation of the national digital currency in August 2022. From November 2022 to the present, the RBZ has been conducting consumer surveys on the CBDC, which has led many to believe that the RBZ may be reconsidering its position. This piece will look at why, despite the RBZ's denials, the RBZ may be reconsidering the idea of a central bank digital currency.
Investor faith in cryptocurrencies has been destroyed by the collapse of FTX, a $32 billion cryptocurrency exchange. Market participants are attempting to determine the severity of the harm it has inflicted and how it will change the sector in the years to come. Sam Bankman-Fried, the outgoing CEO of FTX, was detained and accused of money laundering, wire fraud, and securities fraud by the US government.
Digital currency exchange FTX connects buyers and sellers of derivatives as well. But, the business allegedly went above and beyond by using its sibling company Alameda Research to execute dangerous bets by accessing client accounts. The FTX drama may fundamentally alter crypto in the years to come. Here are three significant changes the sector might undergo.
For one, the disaster will look certain to stir regulators into action. Crypto as an industry is still largely unregulated, meaning investors don’t have the same protections they would have placed their funds with a licensed bank or broker. That may be about to change. Governments in the U.S., European Union and the U.K. are taking steps to clean up the market. If there’s no regulation, the investors are left without the protection that they need. The EU’s Markets in Crypto-Assets are the most comprehensive regulatory framework to date. It aims to reduce the risks for consumers buying crypto, making exchanges liable if they lose investors’ assets.
Many new companies and projects emerged in the years that followed the 2018 crypto winter — FTX among them. The expectation now is that fewer firms and coins will exist in the years to come. Contagion from the FTX saga is already playing out. Crypto lender BlockFi, which earlier sought financial assistance from FTX, has entered bankruptcy. Now, attention is turning to other trading and lending firms, like Gemini and Genesis. I don’t think all the dominoes have fallen out from the contagion. The impact that this will have is that a lot of projects are not going to have the funds.
Fears have risen over the financial health of other major crypto exchanges after FTX’s failure. Since early 2020, about 900,000 bitcoins have flowed out of exchanges, according to data from CryptoQuant.Binance, the world’s largest exchange, is facing questions about the reserves it holds to backstop customer funds. The company saw billions of dollars in outflows in the past week. Currently, there is no reason to suspect Binance faces any risk of bankruptcy. But exchanges like Binance and Coinbase face a bleak market backdrop ahead amid falling trading volumes and account balances.
Despite the depressed state of crypto markets, and the toll it’s taken on investors, the digital asset industry is likely to pull through.NFTs, or nonfungible tokens, could alter users’ relationships with properties in games and events, for example. These are digital assets that track ownership of unique virtual items on the blockchain.
Zimbabwe: Is a central bank digital currency feasible?
Zimbabwe is now considering ways to implement a central bank digital currency (CBDC). Yet, for Zimbabwe's cash-strapped economy, how practical is a CBDC, a digital currency that only exists in electronic form, and how will this affect the current mobile money landscape?
The prohibition on cryptocurrency trading issued by Finance Minister Mthuli Ncube in 2018 dealt a devastating blow to the rapidly expanding market for digital currencies in the nation at the time. Ncube appears to have changed his position, though, after visiting Dubai Multi Commodities Center, a cryptocurrency hub in Dubai.
Zimbabweans are familiar with the digital currency phenomenon because they have long used mobile money systems like Ecocash and Netone's OneMoney as well as their own Real Time Gross Settlement (RTGS). Although Ecocash will construct a system around the CBDC and interact with the new system, it won't be an alternative to Ecocash. The nation's central bank tightened regulations on mobile money platforms between 2020 and 2021 and reduced restrictions on cash transfers and the usage of agent lines throughout its network. At the time, Econet was accused by the Reserve Bank of Zimbabwe of operating a Ponzi scheme by using its platform to swap foreign currencies, which was causing inflation.
UK tightens grip on crypto
According to a statement released, the Financial Conduct Authority "used its authority to check numerous sites in East London suspected of hosting illegally operated crypto ATMs," which enable users to exchange fiat currency for cryptocurrency. According to a statement, the regulator will examine the information acquired during its visits and, where appropriate, consider taking additional action. It said that there aren't any crypto ATMs in the nation right now that are FCA-registered. This effort, which was carried out in collaboration with the Metropolitan Police, comes after a related one in Leeds last month. The watchdog frequently cautioned investors they run the danger of losing all of their money after discovering in 2021 that 4.4% of British adults owned cryptocurrency.
Global regulators are tightening crypto regulations in response to a wave of business failures brought on by the continued decline in the value of digital assets. After reaching a high of almost $67,000 in late 2021, the price of a single Bitcoin has since dropped to roughly $22,000. When the price of Bitcoin skyrocketed, ATMs that let users convert fiat money into cryptocurrency flourished; however, the "crypto winter" has already seen a substantial decline in activity.
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