The government of Zimbabwe dismissed reports that it was planning to adopt bitcoin as legal tender. Many critics following the developments say this doesn’t come as a surprise.
“[Zimbabwe] is not considering introducing another currency in the economy as reported in some sections of the media,” Information Minister Monica Mutsvangwa told journalists after a cabinet meeting in Harare on Nov 9.
“Our local currency is the Zimbabwe dollar, and not cryptocurrency,” she emphasized. Mutsvangwa revealed that the Zimbabwean authorities are instead interested in a central bank digital currency (CBDC) “as opposed to cryptocurrencies, bitcoins or any form of derivatives.”
It comes after a senior government official in the President’s office, Charles Wekwete, intimated that the African country was looking to adopt cryptocurrency as a legal tender. Wekwete clearly spoke out of turn, analysts say.
However, global crypto news media picked up his unqualified statement — and hoping for another El Salvador bitcoin moment — blew it out of proportion.
“It was madness. It was a clear misunderstanding of what was being said,” William Chui, a Zimbabwean crypto enthusiast and advocate, said of the media’s interpretation of Wekwete’s remarks.
“The [original] article from which these stories were derived doesn’t show any steps toward government adopting bitcoin as legal tender. It is just a conversation that is going on between government and business, which is total bullshit,” he added.
Government is powerless to control bitcoin
Zimbabwe is often cited as a good case for bitcoin adoption because of its long-running currency problems. While this may be true, there are a few factors that may prevent this from happening, at least at the government level.
Finance Minister Mthuli Ncube has in the past clearly stated that bitcoin will never be used as “a transaction currency but as an investment class.” Even then, the digital currency will be ring-fenced in the “offshore financial center so that it does not circulate locally,” he said.
As a decentralized currency, bitcoin is not vulnerable to the whims of central banks. This will be anathema to a government that has a history of printing large sums of money to fund populist, and very often, dubious policies. It also explains why Wekwete’s comments would have been implausible to anyone with the slightest idea of Zimbabwe’s economic and political history.
Historically, economically failing and increasingly isolated governments, like Zimbabwe’s resort to obsessive control of institutions and repression of citizens as they voice protests. Bitcoin as legal tender threatens to take away this control from the Reserve Bank of Zimbabwe (RBZ) and give people a certain degree of financial freedom — something that is detestable to authorities.
Chui, a former top executive at local crypto exchange Golix, which was forced to close by the RBZ in 2018, is concerned about the ways that government would employ to police bitcoin in the event it was ever adopted, in any form, in Zimbabwe.
“The government’s concerns are to do with capital flight, they call it externalization, terrorism financing, taxes – the Zimbabwean government loves to tax people. It is possible for the government to adopt cryptocurrency, but regulation would have to come through crypto exchanges. It’s at that point that government can apply its desired control measures,” Chui said.
However, for Zimbabweans, some of whom have lost pensions and savings a decade apart, the virtues of bitcoin are becoming increasingly evident.
Whereas fiat currencies are subject to geopolitical considerations and fiscal discipline, bitcoin investors have little reason to worry about central banks or sanction committees, who are powerless to control a decentralized cryptocurrency.
Should ‘hyper-bitcoinization’ occur, it will almost certainly be fast-tracked by bad policies. While some countries are clearing the turf for cryptocurrency through soft-touch regulation, Zimbabwe is unwittingly doing the same by failing to contain inflation and maintain liquidity, culminating in a breaking point where citizens will be forced to take back their financial freedom through alternative currencies, primarily bitcoin.
Credited to Satoshi Nakamoto Institute co-founder Daniel Krawisz, hyper-bitcoinization is a term that describes bitcoin coming to dominate the global currency basket through mass adoption.