BLOCKCHAIN technology can help enhance transparency, efficiency and grow investor confidence in Zimbabwe’s fledgling capital markets, experts say.
The technology, which underpins crypto-currencies like bitcoin, is temper-proof. Its decentralised nature allows for financial transactions to be traced throughout the payment process by anyone with a computer or smartphone with internet connection.
These characteristics have meant that blockchain technology is now being adapted for use in several spheres including the supply chain, banking, financial markets and even voting, to curb fraud while improving transparency.
Zimbabwe Stock Exchange (ZSE) chief executive Justin Bgoni told our Harare Bureau that the exchange is open to exploring how it can harness Blockchain technology in the near future although there is still no regulatory clarity on the matter.
Mr Bgoni spoke about introducing blockchain-based new products and services such as real estate investment trust securities (REITS), mineral commodities exchange and exchange traded funds (ETFs) as key to expanding the market into a vibrant exchange.
“It’s something (Blockchain technology) we need to look into, though not now, the technology is very good,” Bgoni said in an interview at the inaugural C-Trade investor conference day in the capital last week,” he said.
“Each transaction, you can see who owns it so it is easy to audit it that is why people like it, is easy to verify it, it is transparent and takes away fraud, that part of the technology you can see everything and it makes sense, it is definitely an area that ZSE can explore.”
Elsewhere around the world, some stock exchanges have not only adopted Blockchain, they have also started to offer crypto-currency-related products, in a move that’s been viewed as key to introducing crypto-currency to conventional equities investors.
In April, for example, the Jamaica Stock Exchange announced that it was starting a limited pilot to trade bitcoin (BTC) and ethereum (ETH). The move by the JSE is the latest in a series of announcements that aim to open the doors to crypto-currency investment.
In the US, Nasdaq, the world’s second largest stock market by capitalisation, has recently listed BTC and ETH indices, while Switzerland’s main stock exchange, SIX, listed a ripple-based exchange-traded product.
Mr Bgoni indicated that there was no clarity yet on regulations governing the trade of blockchain-based virtual currencies in the country.
“Then there is the money side to blockchain technology. This is a bit difficult, in terms of regulation, we are not yet clear on this and we do not want to do something where regulation is not clear as an exchange. But the technology side is very good,” he said.
It will be interesting for the ZSE to adopt blockchain that will create a safe, efficient and transparent regulatory framework.
With its many years of experience, the ZSE has earned people’s trust, institutions trust the exchange and Government has developed safe regulatory frameworks for it to operate; blockchain and blockchain-based products have a huge chance of success with the ZSE.
The bourse is by far one of the most important examples of human efforts to distribute economic wealth via fractional financial instruments locally.
Already, the Zimbabwe Stock Exchange has embraced other technologies allowing for the complete automation of trades.
Last year, ZSE launched C Trade, which enables investors to trade shares on their mobile devices anytime anywhere as efforts to open the market to everyone.
In a related interview, Kenya’s Central Dipository and Settlement Corporation (CDSC) Kenya chief executive Mrs Rose Mlambo weighed in saying technology had become a disruptor and capital markets in the region could take advantage of that to improve access to information, efficiency in trading of shares as well as enhance transparency and accountability.
“Blockchain is the next big step in technology on our capital markets as Africa. It is good and enhances the security of your investment, every time you do a transaction it is recorded everywhere and cannot be altered at any stage. This is what investors want to boost their confidence,” she said.
Mrs Mlambo added Zimbabwe could learn from Kenya, which had managed to break the elitist tag associated with capital markets by allowing more small retail investors to participate via mobile applications.
In Kenya, government has managed to raise funds through floating bonds on the market and allowing everyone to participate.
Mrs Mlambo said Zimbabwean and Kenyan markets were almost similar and more investor education was needed to enhance the participation especially of local retail investors to make wise investment decisions as opposed to betting.
This, she said, would also help in the financial inclusion drive that African governments are pushing. In Zimbabwe, financial inclusion in capital markets is estimated at one percent.