In September 2021, El Salvador decided to take financial matters into its own hands. In a heroic move to save El Salvador’s economy, President Nayib Bukele officialized the adoption of Bitcoin as legal tender, creating a precedent for other countries to follow. The move to make Bitcoin El Salvador’s national currency was motivated by the president’s goal of providing financial inclusion to the unbanked, which consists of 70% of the El Salvadorian population. Additionally, the president hypothesized that making Bitcoin the legal tender of El Salvador would incite foreign entities to invest in the country. So with El Salvador breaking the ice in the crypto industry, who will be the next to follow in its footsteps?
Is Zimbabwe planning to adopt Bitcoin as legal tender?
Recently, rumors of Zimbabwe being the next in line to adopt Bitcoin as legal tender rapidly made headlines everywhere. They were instigated by a public speech given by the Secretary of the President’s office, Charles Wekwete. Many attendees were quick to jump to the conclusion that Zimbabwe was exploring the idea of adopting Bitcoin as the country’s national currency.
But just as rapidly as their explosion on social media, the rumors were quickly squashed by Zimbabwe’s Minister of Information Monica Mutsvangwa, who publicly rectified that the government of Zimbabwe had never considered the idea of making Bitcoin legal tender. Furthermore, Zimbabwe lawmakers consider Bitcoin too volatile to be legal tender. Instead, the government has been mulling over the idea of introducing a central bank digital currency (CBDC).
Mutsvangwa said during a cabinet briefing: “Government would like to assure the nation that it is not considering introducing another currency in the economy as reported in some sections of the media. Our local currency is the Zimbabwe dollar (ZW$) and not cryptocurrency.” But first, studies on central bank digital currencies in Zimbabwe need to be carried out before an official decision on whether to introduce them can be made.
Crypto trading in Zimbabwe
Currently, cryptocurrencies remain an unrecognized asset class in Zimbabwe. Although the government has expressed its desire to explore blockchain technology and its innovations, it is less open to the idea of giving up control of monetary systems and policy within the country. With the government disapproving of crypto transactions, many traders have resorted to trading crypto on social media platforms like Signal, Telegram, Whatsapp, and Facebook. Trading digital assets in Zimbabwe is therefore majorly done on a peer-to-peer basis as banks and financial institutions do not have the green light to transact with them. Zimbabwe moved to ban cryptocurrencies in 2018, but then later expressed its wish to regulate it.
However, rumors that the country was looking to adopt Bitcoin as legal tender were quickly dispelled. Despite that, Zimbabwe may make place for digital currencies in its economy through a CBDC.
The rise of CBDCs
By adopting a state-backed digital currency, digital transactions may become more regulated and this may serve as a means to boost the economy.
Zimbabwe is not the only country that has responded to the recent boom in cryptocurrencies with a more centralized counter-proposal: CBDCs. Central banks seem to have spurted to life with the rise in popularity of cryptocurrencies. With the quick growth experienced by the cryptocurrency industry, lawmakers and governments are now increasingly realizing that they too need to get onboard this digital revolution to remain relevant. Although cryptocurrencies aim to fulfill a decentralized purpose, giving the people control over their own finances, regulators are calling for this space to be regulated. In the future, will digital finance be regulated or will it succeed in creating a decentralized ecosystem? Will we see a boom in central bank digital currencies or will more countries adopt Bitcoin as their national currency? A lot of change is still to be expected of the crypto space as it remains a nascent industry.
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