WITH Zimbabwe increasingly battling distressing cash woes, most economists recommend bitcoins as an alternative currency during these times.
Economist Philip Haslam a co-author of When Money Destroys Nations, suggested that Zimbabwe should institute a privatised bitcoin currency.
By Kudakwashe Pembere
Though his assertion is not new, it is one of the first to come from someone who has researched the consequences of money printing as an aspect of the country’s hyperinflation.
“If Zimbabwe establishes a privatised bitcoin national currency, if the market naturally went to a Bitcoin type currency, as other currencies around the world indicate weakness with money printing happening, you’d have a whole lot of currency flowing into Zimbabwe,” Haslam says in a piece by an Institute of Security Studies ISS Consultant, Simon Allison. “Zimbabwe would transform from a basket case to a global banking centre in a stable cryptocurrency. And that would be fairly quick.”
But with Bitcoin as a stable currency alternative, there won’t be the problem of the currency eroding and perishing as it is with notes.
Haslam claims the Bitcoin system allows for privatised banking and it is both a currency and international payments platform.
His co-author in the book, Russell Lamberti said, “Zimbabwe has numerous options for currency reform. One would be to set up a currency board, which is a legislative requirement to back a ‘new Zim dollar’ at a fixed parity to the US dollar or to the rand, or to a weighted FX basket, with no monetary policy discretion by the RBZ. Another option is to fully adopt the rand in negotiation with South Africa.
“In this case, Zimbabwe submits its entire monetary and financial system under the regulatory jurisdiction of the SARB and Zim banks become subject to the SA repo system. Alternatively, Zimbabwe could have a laissez-faire monetary system in which there are no legal tender laws and no state currency.”
For Lamberti, there are no major economic hurdles preventing a rescue of Zimbabwe’s economy, and adopting the rand would be one viable option to achieve this.
A larger challenge, however, is political.
“In principle, monetary reform is not that hard in Zimbabwe, whichever option it were to choose. The real problem is political. As long as the state is run as a fiefdom and industry is systematically destroyed and productive people looted from, there is little hope. Mugabe knows that meaningful currency reform diminishes the ability of the state to loot the country. That is the big hurdle.”
Elsewhere in the region, the rand has been adopted with some success. Although Lesotho, Namibia and Swaziland all maintain their own currencies, these are all pegged to the rand, and the rand is widely accepted for trading purposes. Botswana pegs its pula to a basket of currencies, with the rand given the greatest weighting.
However, while new Bitcoin-related initiatives have recently emerged in parts of Zimbabwe with operators such as BitMari, BitFinance and Bitrefill offering cross-border payment, exchange and call credit refill services, the local financial services regulator the Reserve Bank of Zimbabwe (RBZ) has not changed its stance that Bitcoin is a risky venture for its users in the country.
The central bank hinged its position on its lack of a regulation for cryptocurrencies.
Bitcoin is a form of digital currency, created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems.
A software developer called Satoshi Nakamoto proposed bitcoin, which was an electronic payment system based on mathematical proof. The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees.
It’s the first example of a growing category of money known as cryptocurrency.