Adopting a new cryptocurrency is the future-oriented thing for Zimbabwe to do because it’s the only way to solve the currency troubles in an economic crisis such as the existing one.
Zimbabwe has struggled with hyperinflation in 2007, as they reached the peak of 80 billion month on month before the currency collapsed.
The government stopped printing the Zimbabwean dollar in 2009, resulting in the country becoming a multi-currency nation as they were using international currencies such as US dollar, South African rand when trading.
The country reintroduced the Zimbabwean dollar in June 2019 banning the use of foreign currencies as legal tender. This has resulted in hyperinflation problems while the finance minister is saying his action is stabilizing the economy.
According to Harare-based economist John Robertson a, Zimbabwe’s official annual inflation rate was 230% in July – and rising.
Michael Jordaan former FNB CEO and Montegray founder said: “Inflation forces the poor to spend their income on basic necessities such as food and shelter leaving little to invest in education or acquiring inflation resistant assets,”.
“Once again the poor are overwhelmingly being made to pay for their bad government, who hold real assets like land or currencies that are trusted are not affected.”
Fighting inflation with a stable cryptocurrency
Jordaan said there are a few causes of inflation, which include the government printing way too much money to first pay their own bills,”.
Adopting a stable cryptocurrency also known as a stablecoin could help to keep Zimbabwe’s inflation in check.
Stablecoins are typically pegged to a currency or exchange-traded commodities, which minimizes volatility.
“One of the major benefits of cryptocurrencies is that they are governed by mathematical algorithms rather than by humans who decide how much money to print,” Jordaan said.
“We know exactly how much Bitcoin has already been created and how much will still be prined. We have no idea how many Zimbabwean dollars will still be printed.”
Jordaan said, “the effects of hyperinflation on an economy are devastating tax revenues drop, businesses die, unemployment rockets, and political instability becomes inevitable.”
For this reason, he said, Zimbabwe would be well-advised to abolish their untrusted dollar and adopt a trusted cryptocurrency that has a limited supply and is free to transact on mobile phones.
Zimbabwe can adopt a stablecoin like Facebook’s new Libra cryptocurrency to avoid the volatility of Bitcoin
“Another option is for Zimbabwe to launch their own ‘Zim dollar’ cryptocurrency with explicit supply constraints that are optimal for their economy.
This is an opportunity to be visionary, to stop taxing Zimbabwe’s poor by embracing the future,” said Jordaan.
Jordaan indicated that this forward-looking approach to money is unlikely to happen in Zimbabwe.
“Sadly, the best we can hope for is that they follow a more conventional approach and adopt the currency of their largest trading partner, South Africa’s Rand as their de facto transacting medium.”
“This would at least reduce inflation in Zimbabwe to the 3 – 6% range and enable economic growth to rescue Zimbabwe.” he said