Mwanamvekha says Malawi alert on Crypto-currencies: ‘Financial technology replacing cash-based system’

Minister of Finance, Economic Planning and Development Joseph Mwanamveka  has said the digital means of financial means of payments are slowly replacing traditional cash-based system through various innovative solutions in the financial technology (Fintech).

Group photograph
Interactive break
The delegates
Kabambe, Mwanamveka and YoungBae Moon

Mwanamvekha made the remarks  at the Monetary Policy Conference organisers by the Reserve Bank of Malawi (RBM) on Monday, November 18 2019, at Nkopola Lodge in Mangochi, whose theme was ‘Cryptocurrencies and Monetary Policy in Malawi’.

The Treasury Czar said cryptocurrencies, being the latest form of digital currency transaction in the private Fintech space, are increasingly gaining popularity among the general public and attracting a lot of interest from various policy makers, international organizations and private institutions in many countries around the world.

“It is for this reason that I applaud the choice for this year’s Monetary Policy Conference chosen by the Reserve Bank of Malawi,” said Mwanamvekha

He explained that cryptocurrencies started way back in the gambling business where the coins used for playing and redeeming prizes won were allowed to be used in other private service providers.

“It is not legal tender but was generally used in the gambling business as mode of transacting in other services and has now becoming global.

“Cryptocurrencies, which as decentralized in nature and not issued by the Central Bank, are now being used as a means of payment or invested assets in some jurisdictions across the globe,” he said.

Mwanamvekha said since transactions in these crypocurrencies are online and borderless, Malawi is not immune to these development and as such some of our citizens have recently been involved in this online trading, particularly cryptocurrencies which are not regulated by the Reserve Bank of Malawi.

“It is in this regard that earlier this year the RBM issued a statement to notify the general public that cryptocurrencies are not legal tender in Malawi and that those involved should take caution.”

The Minister said it is not easy in this digital era to prevent the public from exploring these decentralized digital financial innovations and it is imperative for the monetary authorities to remain up to date on the trending developments such as these digital currencies.

“That way we would be able to safeguard the effectiveness of monetary policy and at the same time the RBM, jointly with the government, are supporting the creation of safe and profitable financial investment opportunities domestically as well as a globally integrated payment system,” Mwanamveka said.

The conference was to enrich the delegates from the financial sector to enable them make informed decision in their trading in these decentralized currencies to see whether they have the potential for uncontrolled money creation that might cause inflation.

“From the fiscal side, government is undertaking major efforts to support inflation stabilization agenda through among others, adopting the zero new Reserve Bank financing of the fiscal budget, pursuing predictable borrowing pattern from the market through the issuance of financial calendar and ensuring adequate maize availability.

“With the continued advancements in Fintech, financial systems and economies at large will always be faced with new products and innovations challenging the key roles of of the monetary authorities.

“As a regulator of financial institutions, there is need to be constantly alert of any emerging developments in the financial system in order to remain proactive in putting in place various mechanisms and regulations to monitor and safeguard these innovations from introducing fragmentation and new risks in the infrastructure that could jeopardize the conduct of monetary policy.

“Remaining up to date on the developments in these new technologies is key to ensuring that the financial infrastructure remains safe and stable for successful implementation of monetary policy.”

RBM Governor Dalitso Kabambe said the world is now fast moving from Fin-Tech, where Financial Institutions are using Tech Companies to directly provide financial services and product offerings.

“The longstanding, tried, tested and established traditional financial and monetary system, comprising Central Banks and Commercial Banks, which has served the world community relatively well over all these past decades is to undergo radical structural metamorphosis and operational changes.

“Facebook, Google, Amazon, Apple and Alibaba, the big five global Tech Conglomerates, both in assets and share prices, have all announced plans to issue their own digital currencies.

“At national level, we know that countries such as Japan, Switzerland, Germany and Singapore have already recognised cryptocurrencies as legal tender while the US, Canada and Mexico have not legalised inasmuch as they allow their trading whereas China and Russia have out rightly ruled them out and banned them.

“As for most African countries, including Malawi, they have taken a cautious approach. This is uncharted territory and it will fundamentally change the way we conduct price and financial stability objectives, twin mandates of Central Banks.

Presenters at the conference included associate professor of economics at Chancellor College, Dr. Patrick Kambewa; vice-president of Locus Chain, Professor YoungBae Moon; independent researcher Kondwani Thangalimodzi and South Africa’s head of national payment system, Tim Masela.

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I would strongly advise that we should not be first adoptors in this cyrpto world. It is tooooo risky.