17 February 2019

Zimbabwe: How Cryptocurrencies Can Rescue Zim

On September 17, 2018 media houses were abuzz with the news that the then newly appointed Finance minister Mthuli Ncube was considering cryptocurrencies as an option for Zimbabwe's economic turnaround programme.

The learned professor had clearly articulated the Switzerland central bank's stance on cryptocurrencies and how they had helped turn around that country's ailing economy.

Ncube went on to challenge the Reserve Bank of Zimbabwe (RBZ) to "invest in and understand cryptocurrencies".

This stance was well-received by all Zimbabweans who understand the current digital world.

A cryptocurrency is defined as a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

It has a capacity of multiplying through a process called mining.

Back to the Zimbabwean case, five months down the line Ncube has either developed cold feet on the issue of cryptocurrencies or was gagged and forced to abandon the idea by the old guard that is struggling to adjust to the present world of technology.

Five months later Zimbabwe's foreign currency reserves have gone from bad to worse resulting in protests.

Accusations and counter accusations became the order of the day. Fuel prices skyrocketed.

Prices of basic commodities went up. The existing cross rate between the bond notes and the US$ that has continuously been denied by the government continued to rise rapidly, thereby eroding civil servants' salaries and degrading the lives of ordinary Zimbabwe citizens.

Deaths increased in government hospitals due to the month-long strike by junior doctors.

Mortality rates increased in maternity wards due to lack of essential medicines caused by a massive shortage of foreign currency.

If Ncube had pursued the Switzerland central bank's model on cryptocurrencies, Zimbabwe could have been singing sweet melodies of economic recovery by now.

The much talked about sanctions against Zimbabwe that the present government is always using as a scapegoat would have been tamed and bypassed by now.

The old guard may be forgiven for stopping Ncube on his tracks because of the following reasons:

l The learned professor is surrounded by academically challenged colleagues who still believe in Stone Age tactics of reviving the economy.

Currently the banking sector is down-sizing because of the popular self-service methods offered through internet banking and banking apps that make it easy and convenient to do transactions in the comfort of our homes.

In neighbouring countries like South Africa, Botswana and Zambia, Uber and taxify is fast overtaking the meter-taxi industry.

WhatsApp and Telegram have more or less replaced the Short Message Service (sms).

In light of all this it is, therefore, clear that the traditional methods of reviving the economy through conservative methods like borrowing money from the International Monetary Fund (IMF) is not only outdated, but it is also naïve and myopic.

l Given our country's history of corruption perpetrated by senior government officials and senior political party officials, there is a great possibility that Ncube was gagged and stopped on the issue of cryptocurrencies because the old guard realised that it is impossible to steal cryptocurrencies.

Therefore, why venture into a project that will kill the present cash cow system and cut short gallivanting and never ending shopping sprees that are enjoyed by close associates of government officials?

Going ahead with cryptocurrencies would have spelt doom for the current government that is yet to acquire assets at the expense of the majority citizens.

There is also a greater possibility that the minister's wish was shot down because the old guard simply refused to unlearn their conservative methods of doing things.

This was evidenced by the way the RBZ vehemently fought Golix in court in 2017.

Golix is a company that was trading in bitcoin in Zimbabwe and had installed a Bitcoin ATM in their Batanai Gardens offices.

This Bitcoin ATM was dispensing US dollar hard currency.

The RBZ subsequently lost the court battle and resorted to banning banks from dealing with Golix.

The refusal to unlearn traditional methods and embrace technology left Zimbabwe's economy in intensive care and waiting for the doctors to pull the plug.

This eventually happened on January 14, 2019 and the old guard did what they do best (blamed sanctions, the opposition and civil society).

Had the minister forged ahead with his brilliant idea of embracing cryptocurrencies and copying the stance taken by Switzerland and its central bank, Zimbabwe could have been on the travelling gear to economic recovery.

Switzerland imposed a registration process on cryptocurrency exchanges -- which obtained a licence from the Swiss Financial Market Supervisory Authority in order to operate.

The country published a set of guidelines, which applied existing financial legislation to offerings across a range of areas -- from banking to securities trading and collective investment schemes (depending on structure).

This guaranteed the road to full economic turnaround. Uganda through its central bank legalised and regulated cryptocurrencies.

Instead of fighting amenities like Golix the government should have regulated their operations and secured tax returns.

The government can take notes from Cryptogem Global, an exchange platform pioneered by a young Zimbabwean lady, establish its own crypto exchange and expand it into an international crypto trading platform.

Investment in crypto currencies involves, among other things, the process of actual mining of the cryptocurrencies.

This guarantees accumulation of the said currency without begging superior countries and acquiring unnecessary debts.

Cryptocurrency exchanges can be regulated like in the neighbouring South Africa where Luno and altcoin traders pay tax to the South African Revenue Service.

Zimbabweans that have mastered the art of mining cryptocurrencies and online forex trading are paying taxes on externally registered exchange platforms of which the government is missing out.

Cryptocurrencies can be used to substitute foreign currency in importing necessary raw materials.

Car dealers can import and pay Be Forward using Bitcoin, which is part of cryptocurrencies.

Travellers can also make their travel arrangements and pay at www.btctrip.com using Bitcoin.

Ncube should reconsider his stance on cryptocurrencies.

Zimbabweans based in the United Kingdom are making thousands of pounds by investing in Leocoin, which is part of the cryptocurrency family.

The government can no longer continue to rely on income tax levied on the working class as only 10% of Zimbabweans are formally employed.

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