The Revolutionary Government of Zanzibar is seeking stakeholders’ views on digital currencies, whose uptake is gaining momentum around the world.
Zanzibar’s Minister of State (Economy and Investment), Mr Mudrick Soraga, said the government plans to meet with stakeholders in the third week of this month.
“We are seeking views on the matter before deciding whether it is viable or not,” he hinted.
“You cannot make such a decision without getting input from stakeholders, including banks and the ministries of Finance and Foreign Affairs.”
On Monday, Mr Soraga met with a representative of Hypertech Company, Mr Joe Chuene, to discuss how best the isles government could adopt a cryptocurrency.
Noting that the transaction volume of bitcoin alone has reached $3.2 trillion, Mr Chuene called on the government of Zanzibar to recognise and adopt the cryptocurrency as a mode of transaction.
“The high on-chain transaction volume of the dominant cryptocurrency has demonstrated the efficiency of the asset. It is high time the Revolutionary Government of Zanzibar adopted it,” he recommended.
Prof Haji Semboja of the State University of Zanzibar’s Economics Department said given that Zanzibar is a service-based economy, it was the right move for them to start engaging stakeholders on digital currency.
Since entering mainstream use globally, travellers and tourists have been using cryptocurrencies such as bitcoin as a form of payment for flights, hotel reservations, transportation, and more
However, Prof Semboja said since finance is a Union matter, the government of Zanzibar and the Union government, through the Bank of Tanzania, should come up with policies that will explain the objectives of the digital currency, how it works, as well as its benefits.
Regulators and policy-makers around the globe are continuously evaluating how best to address the specific and sometimes novel issues posed by cryptocurrencies.
“We need to look at what have been the best practices elsewhere,” recommended Prof Semboja.
Ms Sandra Chogo, cryptocurrency expert and author of the book titled Jielimishe kuhusu Blockchain, told The Citizen that for the country to come up with laws and regulations, cryptocurrency had to be defined first.
“Is cryptocurrency money, no; is it shares, no; then what is it?” queried Ms Chogo, who is also a senior auditor at the National Audit Office’s technical department.
After defining, she said, the government would be able to come up with regulations that could decide whether cryptocurrency should be regulated by the BoT, Capital Market and Securities Authority (CMSA), or a completely different regulatory body.
She said education to the public is of paramount importance to avoid scams that could result from lack of a regulatory mechanism.
An independent financial analyst, Mr Christopher Makombe, commended the new development in Zanzibar, saying, “Tanzania cannot remain an island. We need to explore and make cautious preparations.”
He said in the coming years block chain technology, which is behind cryptocurrency, would be part and parcel of life even in areas outside financial markets such as health.
Tanzania Bankers Association (TBA) chairman Abdulmajid Nsekela said as technology evolves, cryptocurrency, which has become a global phenomenon in recent years, is inevitable.
However, he echoed President Samia Suluhu Hassan’s views that much has still to be learnt about the evolving technology.
“We need to start drawing lessons from other countries on how this technology works. For cryptocurrency to be effective, we will need policies for cryptocurrency,” said Mr Nsekela, who is also CRDB Bank chief executive.
In June this year, President Hassan directed the BoT to begin the necessary preparations for virtual-cum-cryptocurrencies.
BoT officials were not immediately available for comment yesterday, but last month the BoT director of economic research and policy, Dr Suleiman Missango, told The Citizen that they were still working on the directives.
A renowned economist, who asked not to be identified, said if any cryptocurrency is to become effective and efficient, it should be accepted by all central banks globally.
“Currencies are stable globally because they are supported by central banks through strong monetary policies,” he said.
Cryptocurrency adoption in Africa grew 1,200 percent between July 2020 and June 2021, making it the fastest adoption rate in the world.
Africa amassed $105.6 billion worth of cryptocurrencies in forecasts for the year to June 30, 2021, triggered by peer-to-peer (P2P) transactions in key growth markets.
Markets like Tanzania, Kenya, Nigeria and South Africa had some of the highest grassroots adoptions in the world and ranked in the top 20 Global Crypto Adoption Index.