Crypto 24 / 7 News

Adopting a stable cryptocurrency is not only a future-oriented thing for Zimbabwe to do, but it can also solve many of the country’s currency troubles.This is the view of former FNB CEO and Montegray founder Michael Jordaan, who said a “stablecoin” like Facebook’s Libra may be suitable.Zimbabwe has been struggling with hyperinflation since 2007, with inflation hitting a peak of 80 billion percent month-on-month before the currency collapsed.After the government stopped printing Zimbabwean dollars in 2009, people started to use international currencies, including the US dollar and the South African rand, to trade.Zimbabwe then reintroduced the Zimbabwean dollar in June 2019 and banned the use of foreign currencies like the US dollar or SA rand as legal tender.Hyperinflation problem in ZimbabweWhile the country’s finance minister said reintroducing the Zimbabwe dollar has stabilised the economy, the cracks are already starting to show.According to Harare-based economist John Robertson, Zimbabwe’s official annual inflation rate was 230% in July – and rising.This hyperinflation, Jordaan said, is one of the big challenges which the country faces and is essentially a tax that hurts the poor for life and across generations.”Inflation forces the poor to spend their income on basic necessities such as food and shelter leaving little to invest in education or acquiring inflation resistant assets,” Jordaan explained.”Once again the poor are overwhelmingly being made to pay for their bad government.Those who hold real assets like land or currencies that are trusted are not affected.”Fighting inflation with a stable cryptocurrencyJordaan said there are a few causes of inflation, which include “too much money chases too few goods”.”It is usually because a government has been printing way too much money to first pay their own bills,” he said.Adopting a stable cryptocurrency – also known as a stablecoin – could help to keep Zimbabwe’s inflation in check.Stablecoins are typically pegged to a currency or exchange-traded commodities, which minimizes volatility.”One of the major benefits of cryptocurrencies is that they are governed by mathematical algorithms rather than by humans who decide how much money to print,” Jordaan said.”We know exactly how much Bitcoin has already been created and how much will still be mined.We have no idea how many Zimbabwean dollars will still be minted.”Replacing the Zim dollar with a stablecoinJordaan said the effects of hyperinflation on an economy are devastating – tax revenues drop, businesses die, unemployment rockets, and political instability becomes inevitable.For this reason, he said, Zimbabwe would be well-advised to abolish their untrusted dollar and adopt a trusted cryptocurrency that has a limited supply and is free to transact on mobile phones.To avoid the volatility of Bitcoin, Zimbabwe can adopt a stablecoin like Facebook’s new Libra cryptocurrency.Another option is for Zimbabwe to launch their own ‘Zim dollar’ cryptocurrency with explicit supply constraints that are optimal for their economy.”This is an opportunity to be visionary, to stop taxing Zimbabwe’s poor by embracing the future,” said Jordaan.Unlikely to happenJordaan indicated that this forward-looking approach to money is unlikely to happen in Zimbabwe.”Sadly, the best we can hope for is that they follow a more conventional approach and adopt the currency of their largest trading partner, South Africa’s Rand as their de facto transacting medium,” he said.”This would at least reduce inflation in Zimbabwe to the 3 – 6% range and enable economic growth to rescue Zimbabwe.” Source – mybroadband.