In a recent statement, the Chief Executive Officer of the Zimbabwe Stock Exchange (ZSE) mentioned that the exchange was open to the listing of Bitcoin and other cryptocurrencies on its soon to be launched wholly-owned subsidiary, the Victoria Falls Exchange (VFEX). “As part of our long term strategy, the ZSE is open for bitcoin and cryptocurrencies to be listed on the bourse subject to regulatory approvals. We think though that VFEX will be a better platform for this.”—Justin Bgoni, ZSE CEO.

While the statement quite predictably caused some excitement and triggered a debate in the local tech and cryptocurrency enthusiast circles, it could still mean any of several things. The most that can be really gleaned from the announcement is that the country’s financial regulatory authorities might finally be warming up towards the idea of cryptocurrencies in general. Beyond that, only Mr Bgoni knows what he really meant.

The actual listing of cryptocurrencies is very unlikely

While there are many ways of interpreting Mr Bgoni’s statement, its simplest and most literal interpretation paints one of the least likely scenarios imaginable. This is because taken directly as it is, it would seem to imply that in the future, cryptocurrencies could be traded on the VFEX right along with conventional stocks and other financial instruments. This is unlikely because cryptocurrencies are mostly traded via online cryptocurrency exchanges which are usually open to all and sundry. I don’t see the ZSE starting one of such, especially considering that their own implementation of an online stock trading platform still requires the active participation of stockbrokers.

The Minister of Finance, Professor Mthuli Ncube described the VFEX as being aimed at “foreign investors and global capital, especially the mining sector”. It is then quite difficult to see how cryptocurrencies fit in. For starters, beyond the term used to refer to how these currencies’ units are created, cryptocurrencies have absolutely nothing to do with mining. Then there is the other point; that of the VFEX being aimed at foreign investors. Now let me (very wildly) speculate vis-à-vis that part and cryptocurrencies.

It is extremely unlikely that the VFEX will actually allow the listing of cryptocurrencies exactly as they are (for instance, with their being treated as financial instruments) as that would just clash with the exchange’s main goal of the trading activities taking place on its bourse benefitting the country’s economy. This is mainly because there are unlikely to be any appreciable volumes of cryptocurrency in the country, so allowing the trade of cryptocurrencies on the platform will only result in mostly foreign parties trading amongst each other. The upside is that this bringing of cryptocurrencies into the midst of mainstream investors will definitely put the exchange on the map at a time when some parties are sceptical that international investors will ever view it as anything other than an institution located in a country with storied economic and monetary mishaps.

Could it benefit Zimbabwean cryptocurrencies?

On the other hand, since the primary purpose of the VFEX is basically that of listing local assets for foreign investors to trade, one can even speculate that the arrangement could also be meant for the benefit of future local cryptocurrencies. In such a scenario, future cryptocurrencies originating from within Zimbabwe would be allowed to launch their Initial Coin Offerings (ICOs) on the exchange to give international investors the chance to partake. Cryptocurrency ICOs are analogous to company Initial Public Offerings. A company looking to raise money to create a new coin, app or another service can launch an ICO. Since ICOs are essentially a fundraising/crowdfunding method whose main appeal arguably lies in their lack of regulation, the ZSE is also unlikely to be taking this route.

It could mean the trading of cryptocurrency ETPs

The most grounded theory I can come up with at the moment is that the ZSE CEO meant that the VFEX will allow Zimbabwean companies and institutions to list their cryptocurrency Exchange Traded Products (ETPs). Investopedia defines Exchange Traded Products as types of securities that track underlying securities or other financial instruments. Given the varying regulations around cryptocurrencies throughout the world, with many countries out there making it difficult or near impossible for their citizens to participate in cryptocurrency trade within their own borders,  many foreign investors would be happy to find somewhere where they can freely trade cryptocurrency assets. This would also present an unprecedented opportunity for Zimbabwean companies which can rise to the occasion and offer these products.

It could just be the ZSE marketing itself

On the other hand, given the recent state of the economy and the widely criticized shutting down of ZSE floors because of a theory that its activities were devaluing the Zimbabwean dollar, the ZSE may be using the VFEX and such ambiguous pronouncements to try to rehabilitate its own image and that of the country as an investment destination that actually makes sense.