This is an opinion by Thabo P. Ncube, a Bitcoiner who lived through Zimbabwe’s hyperinflation in 2008.
The Reserve Bank of Zimbabwe (RBZ), the fiat custodian and lender of last resort in the country, recently “liberalized” its much-vaunted foreign exchange auction trading system in hopes of selling foreign currencies at market-determined exchange rates through regulated banks.
Zimbabwe uses a multi-currency system, with 80% of its economy being dollarized, according to economists. The black-market rate for the U.S. dollar (USD) has recently been twice as high or even higher than the official rate backed by the RBZ.
In January 2023, the local Zimbabwean dollar (ZWL) was trading at about ZWL$705 to $1, but on June 7, 2023, just after the bank’s pivot, the official price was about ZWL$4,868 to $1. Just a day earlier, 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 was estimated to have reached 75.6%.
Professor Steve Hanke of 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 Bitcoin adoption in Zimbabwe, and that no person and no institution will be able to stop it.
In The Wake Of Financial Crisis
For most Zimbabweans, 2023 must feel like déjà vu all over again.
In 2008, at the apex 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 bundles of money just to buy food essentials in long queues.
The country stabilized to a certain extent, a “Government of National Unity” was formed between the ruling party and the leading opposition party after a disputed and violent election. The nation fully adopted the USD and it was minted as the only legal tender. Public or private sector employees who had worked for 30 years and sometimes more lost their savings as the whole economic infrastructure collapsed.
The value of trillions of ZWL just vaporized and left many in despair. To this day, many Zimbabweans prefer keeping their money at home, affectionately known as “mattress banking,” because the financial institutions, government bureaucrats and politicians let them down. Who can blame them?
But many miles away, as Zimbabweans were still getting to understand their new normal, Satoshi Nakamoto was pioneering Bitcoin. This wouldn’t just be a revolutionary way of transacting and storing value, but in the future, could be a way for normal Zimbabweans to avoid the painful memories of 2008 and many more failures of government and fiat currencies.
Continued Crises
Since 2016, another crisis has been looming on the horizon.
The RBZ introduced “bond notes” and “coins” to help with change when transacting. Only USD notes were available on the market and coins were hard to come by. Experts warned this was the resurrection of the ZWL, but the RBZ denied that and defended itself — the current governor, John Mangudya, even promised to resign if this scheme didn’t work.
Despite evidence that it is not working, Mangudya was given another term and the ZWL was fully resurrected by June 2019. Zimbabweans once again lost their savings as the government legislated that the ZWL was equal to the USD in their bank accounts. The black market for foreign exchange was resuscitated and people began paying a premium for USD notes outside of the normal financial sector. Zimbabweans had been lied to once again by people who professed to having their best interests at heart.
But they had learned their lesson and, by early 2018, bitcoin in Zimbabwe was trading at a premium, at one point reaching a price of $17,875 while across the world the price was closer to $10,000. People were looking for ways to store their hard-earned money in value and bitcoin was proving to be a viable solution.
But in May 2018, bitcoin was effectively banned in the country as all financial institutions were instructed to stop transactions linked to Bitcoin. This nearly totally killed the local Bitcoin community and sent many people to seek unorthodox ways to acquire BTC.
In June 2022, the RBZ introduced gold coins as a store of value. By May 2023, it was also introducing gold-backed digital currency. This was clearly an indication that the local currency was racing to the bottom again.
Over 90% of the tokens and gold were bought using ZWL and they could be vested after a certain period in USD. This seemed like a good way for the elites to store the depreciating currency in gold while the rest of the populace watched the ZWL crash every week.
Tentatively, it seemed like the gap between the demand and supply of the USD on the market keeps on widening and the apex bank’s methods of shouldering the local fiat currency keeps on failing. People don’t trust its methods, and rightfully so. Unfortunately, with governments controlling the fiat money supply, these kinds of problems will persist, small and large.
As a result, Zimbabwe could be heading toward another dark period. Recently, the price of a loaf of bread changed twice in less than a day, from ZWL$10,000 to ZWL$12,200.
To make things worse, some banks have published statements limiting the usage of Nostro accounts, instituting panic across the board and setting up a possible bank run. Nostro accounts are the Zimbabwean versions of foreign currency accounts, which have become needed as the government and private employers have taken to paying employees portions of their salaries in USD, along with the highly-inflationary ZWL. Now, it seems like the government payments are not backed by real cash on hand.
A Way To Preserve Value
Against the backdrop of all this, Bitcoin is emerging again as a valid way to preserve value.
Via VPNs, which can be used to access exchanges blocked in the country; no-KYC or KYC-light exchanges all over the world; and peer-to-peer networks through WhatsApp and Telegram, Zimbabweans are finding ways to access Bitcoin. Bitcoin provides security, absolute scarcity, a commitment to accountability via a public ledger and, more than anything else for those in Zimbabwe, a store of value. Bitcoin puts control of an individual’s destiny in their own hands and that’s just perfect for a lot of Zimbabweans, who won’t have to rely on politicians and bureaucrats for their economical survival. More than anything. Bitcoin is independence, freedom and individual sovereignty.
Bitcoin represents more than sound money in Zimbabwe, and no political government can ever match its standards and safety. And this time, the RBZ won’t be able to stop Bitcoin, as the people have figured out ways to exist in the safety of Bitcoin outside of the regulated financial corridors. Bitcoin is now!
This is a guest post by Thabo P. Ncube. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.