The economic woes of Zimbabwe are not exactly news anymore. Yes, the headlines about trillions of Zimbabwean dollars being worth just one of their US equivalents may have faded, but there is still the serious question of hyperinflation in the country. So, the fact that
cryptocurrencies are starting to make some serious inroads has to be a good thing. This is especially true of alternatives to Bitcoin and the fact that, for example, Ripple value has been showing a steady rise over recent months making it one of the more favoured cryptocurrencies currently available in the country.
This could become even more significant during 2020 when a number of factors suggest that the financial crisis is set to deepen. On top of the inflation rate that is still out of control, the severe drought of 2019 means that food supplies are short with the UN World Food Programme issuing a warning that they could run out within months. Beyond the most serious consequence of the hunger this could cause, the shortages are certain to raise food prices even higher.
While there is very little that the use of cryptocurrencies can do to alleviate food shortages – that will be a question of receiving international aid – they are being seen as a way to create greater economic stability. It’s certainly the case that a great many Zimbabweans have very little reason to trust the established financial sector so are receptive to any alternatives that may be available.
Already a number of these cryptocurrencies have been adopted with Bitcoin, Ripple and Litecoin being three of the most popular. This is in spite of the fact that the Reserve Bank of Zimbabwe has constantly reiterated that these currencies are unregulated, and their use presents a considerable risk with no recourse to the law. In the past the bank has gone even further in attempting to shut down the country’s biggest cryptocurrency exchange, Golix, which was then challenged in the High Court with the ruling being subsequently overturned.
The bank’s position appears to be at odds with that of the government. Led by President Emmerson Mnangagwa, they want to be seen to be addressing the problems created when Robert Mugabe was in power and one of the stated aims is to introduce a new official currency – which may well turn out to be a decentralised one.
There is a possibility that it could be one of the established ones with Ripple being a major contender. Not only has it shown a remarkable level of stability, its possible IPO announced by CEO Brad Garlinghouse at Davos could send its value even higher and bring even more credibility to the currency.
Then there are a number of home-grown alternatives, the highest profile one being Zimbocash. This is the brainchild of South African economist and author of “When Money Destroys Nations” Philip Haslam. The business model for this is mould-breaking with the potential for any Zimbabwean to be given up to 100,000 Zimbocash tokens free of charge providing they encourage others to participate. Once distributed, the tokens will be listed on an exchange where market forces will dictate their value.
It’s a bold plan and one that many hope will be a success. But whether it succeeds or fails, one thing is for certain – cryptocurrencies are set to be big news in Zimbabwe.