Zimbabwe considers adopting cryptocurrencies as legal tender

Crypto adoption would be 'a fundamental departure'over from known financial instruments

The government on Zimbabwe is reportedly mulling over following El Salvador's lead and adopting a cryptocurrency as legal tender.

Discussions with private sector

According t local media, Charles Wekwete, the head of the African nation’s e-government unit, told a summit that the state is undertaking consultations with the private sector on whether to legally adopt an additional medium of exchange. 

Wekwete stated: “In our case, initially we were trying to understand their implementation because they are a fundamental departure from previously known financial instruments and there are a lot of fears about cross border movement of funds, money laundering, externalisation of funds and illicit flow of funds to fund illicit issues.” 

He added: “The Government has put in place mechanisms to try and gather views from various sectors of society in order to eventually formulate policies… Sooner or later the Government will make statements but we have not gotten there yet, the consultative process is already underway.”

Zimbabwe's recent economic history

Formerly known as the breadbasket of Africa and back in 1997, the country was the fastest growing economy on the continent. However, in the past two decades, Zimbabwe has experienced repeated economic hardship. 

Between 2007 and 2009, the nation experienced a famous period of hyperinflation spurred by rampant government spending financed in large part via money printing and expropriation. At its peak in November 2008, year-on-year inflation reached 89.7 sextillion percent. 

In the succeeding decade, the nation relied on other currencies, before switching to the US dollar in 2015. 

Four years later, the Zimbabwean government reintroduced its own currency, now known as the Zimbabwe dollar and declared that all foreign currency was no longer legal tender. 

Two years of triple digit inflation rates followed, with the nation’s central bank forecasting annual inflation for 2021 to range between 35% and 53%. Towards the end of October, the bank hiked its benchmark interest rate from 40% to 60% in an attempt to further the stabilise the currency. 

Within this context of persistent inflation, the  adoption of Bitcoin, a decentralised global means of exchange with a limited total supply would constitute a profound shift in Zimbabwean monetary thinking.

Bitcoin’s role in making remittance payments more efficient and cheaper may prove to be its most attractive feature. Just over 7% of the nation’s GDP is derived from money sent home by Zimbabweans working abroad. 

Further reading

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