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November 03, 2017, 08:11:22 AM |
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While Zimbabwe is generally known to informed individuals, as a country with a less-than-stellar economy, it is currently taking the lead as the world’s top adopter of cryptocurrency. Due to a confluence of economic and political factors, the demand for digital currency in Zimbabwe is so great, that some electronic tokens – such as Bitcoin – have been reported to sell for more than double their current price on cryptocurrency exchanges elsewhere in the world.
Indeed the economic problems and the rapid proliferation of digital currency use in this central African nation, are very much linked phenomenon. The steady worsening of the economy has led to hyperinflation and a dramatic de-evaluation of the local currency – the Zimbabwean dollar. With the economy hitting rock bottom in the early 2000’s, the purchasing power of the “Zimdollar” as it was known – reached practically zero.
Initially the government of Zimbabwe’s immutable president – Robert Mugabe – decided to remedy the crisis by ditching the local currency in favor of the US dollar. This plan soon ran into trouble, as Mr. Mugabe’s government’s record on human rights was even more dismal than their mismanagement of the Zimbabwean economy and the regime was slapped with economic sanction by an exasperated international community. This physically cut off the flow of US currency into Zimbabwe and created a veritable lack of bills for day-to-day transactions.
In an attempt to somehow halt the leakage of any remaining dollars outside the country, the government imposed draconian capital controls, even taking the dramatic step of banning fruit imports. This put the citizens in a bind, as foreign suppliers refused to accept anything printed by the Zimbabwean government. Faced with an acute shortage of foreign currency reserves and a worthless national currency, Zimbabweans have increasingly come to view Bitcoin as safe-haven asset and to rely on cryptocurrency as the only viable way to navigate in a dysfunctional economy.
The above-mentioned factors have lead to a tremendous increase in demand for digital currency in Zimbabwe, to the point where CNN has reported on the 31st of October that the price of the bitcoin has soared beyond $10,000 over the past week, inside the country. CNN was referencing a Harare-based trading platform – Golix.
The case of Zimbabwe parallels in some ways that of Venezuela – another country where hyperinflation and a broken economy have made digital currencies an attractive option. While the government of Venezuela has continued to stubbornly hold onto their worthless Bolívar, the government of Zimbabwe has recently behaved in a more pragmatic manner by permitting its citizens to officially use any foreign currencies that they can get their hands on, to conduct transactions.
It remains to be seen what Mr. Mugabe’s government will think of these developments, with some speculating that in its obstinate intent to maintain capital controls, the authoritarian regime might ban cryptocurrency exchanges. Although its ability to enforce such a ban remains doubtful. Other have pointed out that introducing bitcoin into a country that already utilizes a multi-currency basket, would not be so absurd. Proponents of such an option have even suggested adopting Bitcoin as Zimbabwe’s official currency. If the government of Zimbabwe would consider embracing cryptocurrency then it could potentially position itself to take advantage of what appears to be a thriving market.
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