Zimbabwe’s US Dollar Ban Ignites Massive Bitcoin Fever

July 10, 2019 5:45 PM UTC

Bitcoin trading is booming in Zimbabwe. The government introduced a law banning the use of the U.S. dollar, forcing citizens to adopt a national currency instead.

Zimbabwe’s national currency stopped circulating in 2009 as part of an effort to stabilize the economy. However, in a recent change in policy, the Zimbabwean government readopted a local currency, the RTGS dollar  – later renamed Zimbabwe dollar – and banned settlement of domestic transactions using foreign currencies.

The move was not too popular among the locals, and many avoided using those “Zollars.” Some, like Godfrey Mupanga, have tried asking the courts to ban that decision. Others went to trade dollars on the black market to protect themselves against Zimbabwe’s soaring inflation, while tech enthusiasts have opted to buy bitcoin as a circumvention of government bans.

Bitcoin: The New Currency Fighting Against the “Zollar”

This recent interest in crypto has led to a massive increase in the volume of bitcoins sold in Zimbabwe. And not only that, some citizens have leveraged the advantages of cryptocurrencies to offer services and businesses based on blockchain technologies to bypass government restrictions.

One such example is Tinashe Jani, who reportedly used the blockchain to make it possible to send money between Zimbabwe and South Africa, something impossible after the government banned the use of credit cards outside the country.

“The cut by the banks meant that one could not swipe or withdraw money in their account for rent, fees, or even groceries. So, we started using the local currency to buy bitcoin in Zimbabwe and sending those to SA and immediately converting them to rands for our clients for a small fee.”

Although the government considers bitcoin to be illegal, Zimbabwe citizens prefer to risk using it to avoid losing their purchasing power. In fact, bitcoin trading has increased so much that today this country is one of the most important BTC markets in the southern part of the African continent. Tawanda Kembo, CEO and founder of the Golix crypto exchange, is cited in Quartz Africa as saying:

“What we are seeing is that there is a lot of demand for bitcoin, and there is little supply compared to demand, so all the activity in bitcoin which we are seeing is happening on dark markets instead of exchanges.

Venezuela: The Mirror That Reflects Zimbabwe’s Reality

What’s happening in Zimbabwe is not new. In 2003, Venezuela implemented a similar decision, prohibiting its citizens from freely converting currencies. The direct consequence was a constant devaluation of the national currency and an increase in illegal trade.

All of this was also stimulated by websites and social media accounts that deliberately set rates in the face of the government’s inability to control the currency.

“It’s been one year since our first tweet. During that time the average price of the parallel dollar surged 88619.9%. The official exchange rate DICOM also went up 670731.6%. The devaluation of the Bolivar has been of 99.9%.”

The appearance of bitcoin did not generate an immediate change in the habits of Venezuelans, but the boom of 2017 boosted trading in the country at a frenetic pace. It is hard to think that a country with an economy almost on the verge of bankruptcy is one of the most important bitcoin markets, but it is. And just like in Zimbabwe, this market is sustained exclusively by Venezuelans without state participation.

It seems that bitcoin has become the internet’s hedge to protect citizens from the terrible decisions of their rulers. And if the same thing happens in Zimbabwe as in Venezuela, it could be sooner than later before it becomes the biggest market for cryptocurrencies in Africa.

Last modified: June 23, 2020 2:46 PM UTC

Show comments
Jose Antonio Lanz @jaldps

Lawyer, specialist on strategic planning, professor and Bitcoin enthusiast.