Zimbabwe bans the US dollar, leading to a significant increase in Bitcoin trading.

The Zimbabwean government introduced a temporary currency called RTGS earlier this year, ending a decade-long dollarization policy in the country. On June 24th, it was rebranded as the Zimbabwe dollar, declared as the sole legal tender in the country. Following the implementation of the new policy, Bitcoin trading in Zimbabwe has shown significant growth.

For many Zimbabweans, the Zimbabwean dollar has been a nightmare. In 2008, the country experienced hyperinflation of up to 500 billion percent, leading to the collapse of pension plans and savings of the people. This forced authorities to adopt the US dollar and other foreign currencies the following year.

As part of an economic stability plan, the government reintroduced RTGS, composed of a basket of foreign currencies and bonds. The government has stated that the value of RTGS will be "market-determined" and banned the use of foreign currencies for domestic transactions.

This move has faced public opposition, leading to rapid devaluation of the Zimbabwean dollar. Many businesses have resorted to selling goods in US dollars to avoid triple-digit inflation. Human rights lawyer Godfrey Mupanga recently attempted to challenge this currency policy in court. The public has turned to the black market to trade in US dollars or purchase Bitcoin to circumvent the government ban.

Bitcoin - the new currency against the Zimbabwean dollar

Although Bitcoin is illegal in the country, people are willing to take the risk to avoid the severe inflation. Bitcoin transactions have surged, making Zimbabwe one of the important Bitcoin markets in South Africa. Tawanda Kembo, founder of the Zimbabwean exchange Golix, noted:

What we are seeing is massive demand for Bitcoin, far exceeding the supply, which means that beyond the exchange, there’s a lot more Bitcoin trading happening on the black market.

Zimbabwe - the next Venezuela

In 2003, Venezuela implemented similar policies, prohibiting citizens from freely exchanging currency. This resulted in continuous devaluation of the national currency and a rise in illegal trade. Reports indicate that the Venezuelan currency bolivar has depreciated by about 99.9%.

The emergence of Bitcoin did not immediately change the habits of Venezuelans. According to trading volumes on the over-the-counter platform localbitcoins, Bitcoin trading has multiplied since the end of 2018.

Many may equate Bitcoin with speculation, but in reality, for a country on the brink of bankruptcy, Bitcoin has become one of the lifelines for the people. If the Zimbabwean economy continues to deteriorate, it may become the largest cryptocurrency market in Africa.

Further Reading

• Russian Finance Ministry Considers Opening Cryptocurrency Trading
• Should You Buy Bitcoin? Trump: US Should Counter Currency Manipulation

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