Will Zimbabwe lean on cryptocurrency to deal with new finance regulations?
Digital finance experts are looking to Decentralised Finance (DEFI) as a solution to Zimbabwe’s deepening financial crisis which worsened this week when the government released a statutory instrument curtailing usage of US Dollar in order to prop up its official unit of trade, the Zimdollar.
DEFI encompasses financial platforms and applications based on blockchain or cryptocurrency.
Under new finance laws, traders in Zimbabwe are no longer allowed to solely price their goods in the US Dollar currency and vehicle importers have to get clearance for amounts above US$2000.
This has deepened the use case for cryptocurrencies for financial transactions that include payment for vehicle imports and sending money outside the country.
“Bitcoin usage in Zimbabwe is pretty high amongst seasoned traders and those needing to make international payments,” said local cryptocurrency strategist Tadii Tendayi.
However, with Zimbabwe having previously banned banks from processing cryptocurrency transactions and with its most popular crypto trading platform, Golix folding up, it has been “harder for the average user to acquire bitcoin” hence there have been “traders who sell it at a 7-10% premium,” explained Tendayi.
Industry experts say most of the bitcoin trade in Zimbabwe is now on a peer-to-peer basis, with use cases like sending money outside emerging. Some organisations are seeking to use cryptocurrency and decentralised finance for humanitarian and relief programs in the country.
One such case is ImpactMarket market which has partnered with KotaniPay to create a USSD functionality that “will enable users to convert crypto USD to local currency” to support “vulnerable communities through crypto,” Tendayi added.
Ndabezinhle Kazembe, a cryptocurrency trader and investor from Malawi, has witnessed a growth in the use of cryptocurrency and has an opinion on the situation in Zimbabwe.
Kazembe said, “With the economic situation in Zimbabwe they must have embraced cryptocurrency at large. DEFI can be very substantial if embraced.”
Recently Zimbabwe’s biggest financial institution, CBZ, said it was considering moving over into a digital currency.
The bank’s chairman, Marc Holtzman, said cryptocurrency “opportunities can be pursued through collaboration and cooperation” with Fintechs and other digital finance companies.