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Blockchain is the banking future

AS the world embraces blockchain technology, there have been mixed reactions to cryptocurrency in Zimbabwe, with Reserve Bank of Zimbabwe senior officials particulalrly viewing it with suspicion. However, there are those who say blockchain technology is the way to go. A High Court judge this year lifted the ban on the trading of cryptocurrencies, but, while cryptocurrency trader Golix could resume operations, the ban on banks and financial institutions not to deal with anything blockchain-related still stands. Business reporter Melody Chikono (MC) caught up with Institute of Chartered Sectaries and Administrators (Icsaz) Harare chairperson, Smartvest portifolio manager and cryptocurrency investment expert, Michael Mautsahuku (MM, pictured), to discuss this among other issues. Below are excerpts of the interview:

MC: Give us an overview of the future of blockchain technology.

MM: The main features of blockchain technology is that it is a system that is going to be used to record transactions and is not going to affect only the government, but everyone. Once a transaction has been recorded, it becomes permanent. It’s going to increase integrity and transparency on the reporting system because the future of blockchain technology is that the servers are in the network and there is no single server where the information can be recorded and tampered with. It’s going to be to be very important for all sectors, starting with the government as all information will be available and original. To the private sector and institutions which are mainly going to be affected, I can’t single out any as all institutions will be affected.

MC: How is blockchain technology going to deal with the issue of corruption which is prevalent in the country?

MM: It will drastically reduce corruption. Where control is required is on the integrity of the inputter of the data and, once that is ascertained, nothing can happen to the data. Blockchain data can be relied upon and anyone can access the information, including the directors and shareholders unlike the current situation where information comes from management and information is tampered with but, with blockchain shareholders, consumers and everyone will see the information.

MC: You recommended that government should adopt a digital currency. How sustainable is that in Zimbabwe?

MM: The main feature of the cryptocurrencies in general is that they are unregulated and when they are unregulated it means that there are risks associated with things that it can be used for, so in terms of the government enacting legislation it will still have other features of the cryptocurrencies, but the only difference is that this be issued by the state. If it’s issued by the government, it will be credible; there will be no customary requirements and documents and there will also be no opportunity for people to do money laundering, terrorism financing and other things that are not ethical.

MC: How do you see it addressing the current economic crisis, especially the cash shortages?

MM: In cryptocurrencies, if you look at bitcoin, the number of coins are known, they are 21 million. So the number is fixed, thus it means there is not going to be inflation when all those units are used up and there will be no need for people to have a feared currency. It means that people will just transact digitally.

We also have current problems where, for example, if look at the farming sector, farmers are paid in hard currency a certain amount and the rest is transferred (as Real-Time Gross Settlement). You will realise that the money will lose value by the time they access it through inflation. So when cryptos are issued, it will curb inflation. I would recommend that even farmers, especially tobacco, should use a digital currency across the country.

MC: In line with blockchain technology, what can you say is the future of asset management in Zimbabwe?

MM: The future of asset management in Zimbabwe is going to be greatly disrupted by artificial intelligence where robots are going to be replacing people.

What it means is that all work for asset managers or pension is going to be taken over by technology. The reason why we have pension managers, risk advisers, pension secretaries and so on is because there is no free flow of information on the market.

With adequate information there can’t be any need for all these intermediaries who charge fees for a service which eventually affects the pension receiver. So what will happen to the asset management industry with blockchain is that there won’t be need for any asset managers maybe one or two there won’t be need for any pension secretary because the main job is to link the asset management industry to the contributors.

Then we also have a new industry called the investment advisors, they advise companies that contribute pension funds and also advise pension secretaries, their jobs is only available because they get information which is not available to everyone and relay it. So it means the industry is in great danger because of blockchains and artificial intelligence.

When a company contributes to pension, it can just employ a software engineer with investment knowledge and the information on the portfolio structure, et cetera, is put into the system. Since the Zimbabwe Stock Exchange is online, a computer can do everything that being done by asset managers, pension secretaries and investment advisors.

Currently, if you look at the qualification that is require, the CFA (chartered financial analyst), you will realise that they have already changed their syllabus and, starting 2019, part A and B will now include cryptocurrencies as a subject.

So what would be required would be a CFA holder who is to do programing and must have one or two programming languages. However, it will be to the advantage of the pension receiver but it’s largely going to impact on employment.

MC: What are the main challenges being faced by asset management firms in the country?

MM: Besides economic challenges affecting the whole country, the industry is still gripped with governance issues and lack of knowledge. There is generally lack of knowledge amongst the trustees who sit on the board.
However, Zimbabwe Association of Pension Funds (Zapf) has introduced a certificate of proficiency which we believe will go a long way in addressing those issues.
Pension secretaries and general asset management do not have professionals like company secretaries who are accountable to a certain professional board. Issues of cooperate governance needs to be looked at and discussed educating the public relating to asset management.
In general, asset management companies and pensions firms do not have professionals who are accountable to a certain board and hence leaves a gap in governance issues. There is the macro-economic environment. If the country is not doing well, people do not have access basic information they need.

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