This is an opinion of Thabo P. Ncube, a Bitcoiner who lived through the hyperinflation in Zimbabwe in 2008.
The Reserve Bank of Zimbabwe (RBZ), the country’s fiat custodian and lender of last resort, recently “liberalized” its vaunted foreign exchange auction trading system in hopes of selling foreign currencies in the market- determined exchange rates by regulated banks.
Zimbabwe uses a multi-currency system, with 80% of its economy in dollars, according to economists. The black-market rate for the US dollar (USD) has recently been twice as high or higher than the official rate backed by the RBZ.
In January 2023, the local Zimbabwean dollar (ZWL) was trading at around ZWL$705 to $1, but on June 7, 2023, after the bank’s pivot, the official rate was around ZWL$4,868 to $1. Just a day ago, the black-market rate was reported to be around ZWL$7,000 to $1.
Meanwhile, the month-over-month inflation rate in Zimbabwe was measured at 15.7% in May 2023, while the annualized inflation is estimated to reach 75.6%.
Professor Steve Hanke at John Hopkins University recently measured Zimbabwe’s annual inflation rate at 1,298%, the highest in the world.
I believe that these painful developments, and many others, have opened the door for the adoption of Bitcoin in Zimbabwe, and that no person and no institution can stop it.
In the wake of the Financial Crisis
For most Zimbabweans, 2023 must feel like déjà vu all round.
In 2008, at the height of another financial crisis, Zimbabweans lost their savings when inflation hit world-record levels (79.6 billion percent) and many, including myself, had to carry and wads of money just to buy food necessities in long queues.
The country stabilized to some extent, a “Government of National Unity” was formed between the ruling party and the leading opposition party after a disputed and violent election. The country has fully adopted the USD and it is made as the only legal tender. Public or private sector employees who have worked for 30 years and sometimes more are losing their savings as the entire economic infrastructure collapses.
The value of trillions of ZWL has evaporated and left many in despair. Until now, many Zimbabweans prefer to keep their money at home, known as “mattress banking,” because financial institutions, government bureaucrats and politicians have neglected them. Who can blame them?
But miles away, while Zimbabweans were still coming to terms with their new normal, Satoshi Nakamoto was pioneering Bitcoin. This is not only a revolutionary way to transact and store value, but in the future, it could be a way for normal Zimbabweans to avoid the painful memories of 2008 and many more government failures. and fiat currencies.
Ongoing Crises
Since 2016, another crisis has loomed on the horizon.
The RBZ introduced “bond notes” and “coins” to help change when transacting. Only USD notes are available in the market and coins are hard to come by. Experts warned that this was the revival of the ZWL, but the RBZ denied it and defended itself – the current governor, John Mangudya, even promised to resign if this scheme did not work.
Despite evidence that it did not work, Mangudya was given another term and the ZWL was fully revived in June 2019. Zimbabweans lost their savings again as the government legislated that the ZWL be equal to the USD in their bank accounts. The black market for foreign exchange revived and people started paying a premium for USD notes outside the normal financial sector. Zimbabweans have once again been lied to by people who claim to have their best interests at heart.
But they learned their lesson and, in early 2018, bitcoin in Zimbabwe traded at a premium, at one point reaching a price of $17,875 while globally the price was closer to $10,000. People are looking for ways to store their hard-earned money and bitcoin is proving to be a viable solution.
But in May 2018, bitcoin was effectively banned in the country because all financial institutions were ordered to stop transactions involving Bitcoin. This almost completely killed the local Bitcoin community and sent many people looking for unusual ways to earn BTC.
In June 2022, the RBZ introduced gold coins as a store of value. By May 2023, it will also introduce a gold-backed digital currency. This is clearly a sign that the local currency is racing again to the bottom.
Over 90% of tokens and gold are purchased using ZWL and they can be given after a certain time in USD. This seems like a great way for the elite to keep the depreciating currency in gold while the rest of the people watch the ZWL crash every week.
Tentatively, it seems that the gap between demand and supply of USD in the market continues to widen and the methods of the apex bank to support the local fiat currency continue to fail. People don’t trust its methods, and rightly so. Unfortunately, with governments controlling the supply of fiat money, these types of problems will continue, small and large.
As a result, Zimbabwe may be headed for another dark period. Recently, the price of a loaf of bread changed twice in less than a dayfrom ZWL$10,000 to ZWL$12,200.
To make things worse, some banks publishes statements limiting the use of Nostro accounts, instituting panic across the board and setting up a possible bank run. Nostro accounts are Zimbabwe’s version of foreign currency accounts, which are in demand because the government and private employers pay employees parts of their salaries in USD, along with high inflationary that ZWL. Now, it seems that government payments are not backed by real cash on hand.
A Way To Save Value
Against the backdrop of all this, Bitcoin has re-emerged as a valid means of preserving value.
Through VPNs, which can be used to access exchanges that are blocked in the country; no-KYC or KYC-light exchanges worldwide; and peer-to-peer networks through WhatsApp and Telegram, Zimbabweans are looking for ways to access Bitcoin. Bitcoin provides security, absolute scarcity, a commitment to accountability through a public ledger and, more than anything else for those in Zimbabwe, a store of value. Bitcoin puts the control of an individual’s destiny in their own hands and that is perfect for many Zimbabweans, who do not have to rely on politicians and bureaucrats for their economic survival. More than anything. Bitcoin is freedom, independence and individual sovereignty.
Bitcoin represents more than good money in Zimbabwe, and no political government can match its standards and safety. And this time, the RBZ cannot stop Bitcoin, because people have thought of ways to exist in the safety of Bitcoin outside the regulated financial corridors. Bitcoin now!
This is a guest post by Thabo P. Ncube. The opinions expressed are their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
