The Zimbabwean Dollar cannot store value. If one were to keep their money in the bank, they would lose a high amount of purchasing power. If someone had US$5 000 in 2018, this would be worth US$59 as of 15 June 2020. In other words, what could import an ex-Japanese car then, can only buy a tyre now.
In May 2020, Zimbabwe had one of the highest inflation rates in the world, standing at 785.55%, according to the Zimbabwe National Statistics Agency. This was the second time it was experiencing hyperinflation after the devastating loss of value in 2008-2009 which lead to the adoption of the multi-currency system.
This is why Zimbabweans are obsessed with foreign currency. To acquire it, to transfer it, to keep it, to use it. The US Dollar and the Rand being the preferred options.
This is also the appeal of Cryptocurrency in general and Bitcoin in particular. In contrast with the rapidly depreciating local currency, these digital currencies may grow exponentially.
Consider that in 2 years, the Zimbabwean Dollar has lost 98% of it’s value. On the 22nd of February 2019, when SI 33 of 2019 was introduced, US$1 was worth ZWL$1 (Zimbabwean Dollar) on the official exchange rate. On the 15th of June 2021, US$1 is worth ZWL$85 (Zimbabwean Dollar) on the official auction. Parallel market rates can be up to 50% higher.
The challenges for international exchange for Zimbabwe are numerous. One cannot use the Zimbabwean Dollar anywhere else in the world. It would need to be exchanged for US Dollars first, which are in short supply. You would need to *apply* to a Bureau de Change for foreign currency. The chances of a successful application are so slim, most people do not even bother.
But, even after you acquire US Dollars in cash, you may still face challenges in transferring it. One needs to apply to open a Foreign Currency Nostro account (FCA), which may be denied. Those that are accepted have restricted functionality. Consider that PayPal in Zimbabwe can only *send* but cannot *receive* money. Another platform, Skrill, decided to shutdown all financial services to Zimbabwe. It has even be reported that Binance and Coinbase are closing accounts for Zimbabwean nationals.
Often, people make a slight on Bitcoin that it is difficult to use. That you cannot buy a coffee or a burger with it. There was excitement, when Tesla announced it would accept vehicle payments in Bitcoin, then desolation when it reversed it. Yet, one can send Bitcoin to any wallet in the world fairly easily and in many countries, convert Bitcoin to US Dollars in a matter of minutes.
With this in mind, is it any surprise many Zimbabweans want to participate in Bitcoin? But, this comes with its own hurdles.
I once received a call from a local bank, asking me to return money I had withdrawn the day before. The Reserve Bank of Zimbabwe had picked up my transaction, and demanded it be reversed. The transaction in question? I had withdrawn US Dollars, through the bank, from my Bitcoin Wallet.
At the time, only Bitcoin received from foreign wallets could be withdrawn from the bank. A few months later, the Bitcoin platform itself was closed by the regulator.
Or consider the case of Golix: an exchange platform for Bitcoin. Once a thriving and fast growing enterprise (one of the biggest in Africa), it had it’s operations restricted by the government. The CEO was then reported to have lost people’s Bitcoin.
Cryptocurrency misinformation is chronic. Many people share misleading information either through ignorance or deliberate intention.
Consider, for example, Bitcoin affiliated pyramid schemes such as Bitclub Network. Instead of buying actual Bitcoin, one would participate in opaque multi-level marketing. Nominally, the purpose is to undertake “Bitcoin Mining” but this is not backed by sound financial principles. MMM was similar and many “investors” lost their money.
Others still capitalize on the knowledge gap and position themselves as “coaches”. For a fee, they would promise to teach you everything from Foreign Currency trading, Commodity Trading to Bitcoin. Some are genuine, most are frauds.
Even participation in real Cryptocurrency is fraught with risk. While Bitcoin has grown in the year to date from US$28 000 to US$40 000, it has seen one day plunges of up to 30% of value when the market takes a downturn. It is certainly lower than it’s highest point of US$65 000. But, few coaches and Bitcoin recruiters share such information with a focus on a smooth highway to wealth.
I do not have any Bitcoin. I would like some, when I can afford to buy, get a wallet that is allowed in Zimbabwe and work through all the logistics of Cryptocurrency.
I have won Bitcoin before though. The time of that call from the bank. It was in 2017 and I got second place as part of a start up pitch competition. After all the hurdles, I eventually took my share of the prize money: about US$40. I spent it on 5 bottles of red wine.
I do love sweet red wine… But that’s a story for another day.