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Zimbabwe Interested in CBDC Rather than Adopt Crypto as Legal Tender

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Zimbabwe Interested in CBDC Rather than Adopt Crypto as Legal Tender
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The Zimbabwean authorities are interested in the central bank’s digital currency (CBDC), not Bitcoin or any other cryptocurrency. The Zimbabwe government refuted reports that it plans to use Bitcoin as legal tender.

After a cabinet meeting in Harare on November 9th, Information Minister Monica Mutsvangwa told reporters that Zimbabwe is not considering introducing another currency into the economy, as some sections of the media reported.

“Our local currency is the Zimbabwe dollar and not cryptocurrency.”

she emphasised.

Mutsvangwa revealed that the Zimbabwean authorities are instead interested in a central bank digital currency (CBDC) instead of cryptocurrencies, bitcoins or any form of derivatives.

Earlier, Charles Wekwete, a senior government official in the presidential office, had indicated that Zimbabwe would like to introduce cryptocurrency as legal tender. The global crypto news media blew this out of proportion, hoping to exaggerate El Salvador’s Bitcoin moment again. 

However, this is not the case.

Zimbabwe Government Powerless To Control Bitcoin

Due to longstanding currency problems, Zimbabwe is often seen as a good example of the introduction of Bitcoin. While this may be true, some factors can prevent this from happening, at least at the government level.

Finance Minister Mthuli Ncube has made it clear in the past that Bitcoin will never be used as a transaction currency but as an asset class. He said digital currencies are still locked in offshore financial centres, so they don’t circulate locally.

As a decentralised currency, Bitcoin is not vulnerable to the whims of the central bank. This would be a curse on a government that prints a lot of money every year.

Historically, economic failure and an increasingly isolated government like Zimbabwe have recourse to excessive control and institutional repression when citizens protest. Bitcoin as legal tender threatens to remove that control from the Reserve Bank of Zimbabwe (RBZ) and give people some degree of financial freedom – something the authorities hate.

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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 the 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, and they call it externalisation, 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 the government can apply its desired control measures.”

Chui said.

Set for Hyper-bitcoinization?

However, for Zimbabweans, 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, powerless to control a decentralised cryptocurrency.

Should ‘hyper-bitcoinization’ ( the process where Bitcoin dominates the global currency market through mass adoption) 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.

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