Zimbabwe Embraces Bitcoin: Is it the Answer to the Country’s Economic Woes?

Zimbabwe’s economy has suffered from a tough few years. After the hyperinflation of 2008, the African nation believed it had solved its economic woes by adopting the U.S. dollar as its primary currency. However, using a currency solely controlled by the United States hasn’t been as successful as Zimbabwe had hoped.

The scarcity of printed currency in the country has devalued the money people actually have in their bank accounts. For example, a U.S. issued $100 bill trades at a considerable premium to digital currency. And the introduction of Zimbabwe “bond notes” – a domestic quasi-currency, aimed at solving the country’s cash flow problem – doesn’t appear to have had the effect the country’s government had desired.

In comparison to hyperinflation issues that the country has faced previously, the issue this time is not too much money – but too little. Zimbabwe’s federal reserve bank isn’t allowed to print U.S. dollars, as only the U.S. alone has this ability. Therefore, the country is relying on imported cash to sustain its economy. Whilst that might be good news for international traders looking to get more from their forex trading strategies, it isn’t such good news for Zimbabweans.

However, there’s one other currency that Zimbabweans appear to be turning their attention to, in the hopes that it could be the answer to their economic woes, and that’s Bitcoin. Undeniably the most well-known cryptocurrency, Bitcoin, an entirely digital currency has now been around for over eight years. However, the lack of availability of U.S. dollars has led to a surge in Bitcoin’s popularity in Zimbabwe.

Whilst there isn’t enough interest in Bitcoin in Zimbabwe to spike the currency’s price globally, the fact that its trading at a near $400 premium in the country does highlight just how deep Zimbabwe’s economic wounds are. Over the weekend, local exchange Golix was trading Bitcoin at over $9,899. The exchanged cited Bitcoin’s popularity has surged in Zimbabwe because of capital controls and restrictions.

Of course, the news that Bitcoin is trading at nearly $10,000 in Zimbabwe has sent some followers of the cryptocurrency into something of a frenzy, with concerns that it could have a knock-on effect globally. However, that doesn’t look likely to happen, with the high price of Bitcoin in Zimbabwe closely associated with the country’s acute liquidity challenges. Bitcoin is still priced at less than $6,000 on global exchanges.

Bitcoin is, however, providing savvy Zimbabweans with a way to effect transactions, that require foreign currency. And that’s no surprise considering Bitcoin’s aim has always been to provide a currency that’s decentralised from any federal bank. Yeukai Kusangaya, from Golix, highlights that Bitcoin is being used in the country to pay for international purchases from websites like Amazon. That being said, the spike in Bitcoin prices in the country suggests that the digital currency could be set to face the same supply and demand problem that the U.S. dollar currently is.

It’s unlikely that Bitcoin is the answer to Zimbabwe’s economic woes. It is, however, providing a way for savvy Zimbabweans to make purchases without paying a premium.

Melissa Thompson writes about a wide range of topics, revealing interesting things we didn’t know before. She is a freelance USA Today producer, and a Technorati contributor.