Crypto-assets not securities: SECZIM

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THE Securities Exchange Commission of Zimbabwe (SECZIM) has said it does not recognise crypto-assets as securities.
Regulators the world over have been struggling to define and implement definitive rules for the rapidly emerging asset class, which is characterised by digital tokens that exist in decentralised networks, which are based on cryptographic principles.
In May, the RBZ ordered local crypto-currency exchanges to cease operations just after directing banks to deny them service. The major exchange, Golix, was granted a suspension of the ban on its operations by the High Court but the directive to banks is still in place pending further court proceedings.
In an interview, SECZIM chief executive, Tafadzwa Chinamo, told The Financial Gazette that the commission currently does not recognise the asset class as securities.
“For us, our definition of things is very simple; we regulate securities, so anything that can be classified as a security, we will obviously take an interest in. With crypto-assets, including crypto-currencies, the classification for us at the moment is that they are not securities, so as long as it is not a security, it’s not really something that we concern ourselves with,” he said.
While people generally refer to any tradable financial assets as securities, the Securities Act, which mandates SECZIM, confines the definition to a share or stock in the share capital of a company, debt instruments, depositary receipt, derivatives, or any other instrument declared by government to be a security.
The dilemma of how to regulate crypto-assets has been particularly tough on the securities authority. In the United States, for example, digital tokens in the same stream or network maybe classified differently. The US Securities and Exchange Commission classifies crypto-assets as non-securities, but all digital coins offered through initial coin offering (ICO) are classified as securities.
This means that a portion of a particular type of token might be classified as securities and subjected to due regulation, while another portion of the same type of token is not classified as securities and will remain outside the scope of regulation.
Before the central bank’s directives, which ruined local crypto-currency exchanges, trading in virtual currencies had become very popular in Zimbabwe, with Golix claiming to have had 50 000 active users at a time when the country’s main stock exchange was said to have only 7 000 active users.
Chinamo said the local bourse could surpass the numbers claimed by Golix following the launch of a mobile trading platform, C-Trade.
“Crypto-currencies are an investment vehicle only in a few people’s minds because it’s a little understood matter. But in my view, securities in the form of shares are very straight forward and easily understood by people.
“Historically, we have had hundreds of thousands of accountants on the ZSE so us going past 50 000 with a platform like C-Trade, it’s doable. All it simply needs is the marketing and for us to really engage people and it’s something that we have already started doing,” he said.
“And also for us as a commission, what we are trying to do is encourage awareness among those numbers so we are finalising a campaign or programme for the rest of the year just to sensitise people on what investments are about, what shares are about and how they can get involved as well as how they can use a platform like C-Trade,” he added.
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