Bitcoin prices have surged against the country’s local currency. Although the Reserve Bank banned the use of cryptocurrency, traders have been using digital assets as a method to plug the gap caused by the need for foreign currency.
A ban on the use of foreign currency in the settling of local transactions has led to an increase in the use of Bitcoin in Zimbabwe. Bitcoin trading and transactions have come up since Zimbabwe’s President Emerson Mnangagwa announced that the country would be abandoning foreign currency for local transactions and reintroduced the country’s own currency as the sole legal tender. Zimbabwe has abandoned its Zimbabwean dollar in 2009 due to hyperinflation.
Zimbabwe had been using a multi currency system where the United States dollar was the main currency in use. The British Pound, South African Rand and Botswana’s Pula are some of the currencies which were also legal tender. Foreign currency shortages coupled with demands by civil servants that they are paid in foreign currency led President Mnangagwa’s government to ban the use of foreign currency for all local transactions.
Cryptocurrency to fill in forex gap
After this ban, the use of cryptocurrency in peer to peer transactions has risen according to crypto experts in Zimbabwe. Bitcoin especially is being exchanged among crypto holders in the country in a bid to fill the gap left by the foreign currency ban and the liquidity issues that came with it. Zimbabwe’s biggest mobile money platform, Ecocash, is the main method being used to sell and buy Bitcoin in the country.
Although the Reserve Bank of Zimbabwe banned local banks from engaging in crypto related transactions, the country is still one of the most active crypto markets in Africa. Traders and investors in Zimbabwe make use of Bitcoin as an alternative for the stable storage of their money due to the uncertainty surrounding the country’s economy. The reintroduction of the Zimbabwean dollar has led to a new wave of uncertainty and this could offer an explanation regarding the increase in Bitcoin transactions in the country. Investors would rather hold onto the cryptocurrency in their Bitcoin wallet than trust the local currency.
Bitcoin trades on the black market
Tawanda Kembo, CEO and founder of Golix Crypto Exchange said that there is a high demand for Bitcoin but the supply is limited. This imbalance has led to the activity surrounding Bitcoin in the country happening on the black market on a peer to peer basis. Kembo added that he doesn’t know of any questions exchanges that are experiencing high trade volumes although demand for the cryptocurrency is high.
Since the ban on fiat currencies, traders in Zimbabwe have been making use of PayPal, Western Union and Moneybookers to purchase Bitcoin from traders outside the country. Zimbabwean traders have been paying as much as $12,700 for Bitcoin in the past week. The traders then transact using the country’s mobile money platform or the local currency’s cash for the peer to peer trades. The surge in the local price of Bitcoin has made it a lucrative avenue for traders and they are looking to take full advantage of the price increase.