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Zimbabwe's Foreign Currency Ban Spurs Demand for Cryptocurrency


FILE - A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, May 27, 2015.
FILE - A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, May 27, 2015.

Zimbabwe's ban on foreign currency, and the country's soaring inflation, have spurred demand for cryptocurrencies like bitcoin to try to preserve wealth; however, Zimbabwean authorities last year banned banks from processing bitcoin and warn cryptocurrencies are open to hacking.

For the past two years, Dennis Kadengu has been buying as much cryptocurrency as he can afford. He uses bitcoin to buy and sell online, which he can't do with Zimbabwe's currency as it is worthless outside the country.

Dennis Kadengu buys cryptocurrency when he can, fearing Zimbabwe’s currency will continue losing value against major currency, in Harare, July 16, 2019. (Columbus Mavhunga/VOA)

"Bitcoin, I think, is the most safest cryptocurrency, and in terms of safety, you can have a large amount of money in equivalent to U.S. dollars or euros, having it on your person, moving it around even in seconds which is very beneficial rather than carrying a large bag of U.S. dollars on person," Kadengu said.

Cryptocurrency traders say their business got a boost in June when authorities banned the use of foreign currencies and reissued the Zimbabwe dollar. The currency was abandoned in 2009 after inflation estimated at 500 billion percent made it worthless.

Last month, Zimbabwe's inflation rate rose to 175 percent, raising fears that the days of hyperinflation are on their way back.

Confidence Nyirenda, director of Golix Crypto Exchange, has seen benefits for business.

"So, we have seen a lot of people coming to us saying, 'l want to move X amount of money' or 'l want to purchase a car in Japan,' stuff like that, and we are accommodating them. So, it's really a huge advantage to our side and l think also it will enhance our business in the long run," Nyirenda said.

Confidence Nyirenda, director of Golix Crypto Exchange, says the Harare company assists Zimbabweans in using virtual currencies, July 16, 2019. (Columbus Mavhunga/VOA)

Exchanges like Golix were affected when Zimbabwe banned banks from trading cryptocurrency last year, citing risks.

"The major issues that they had with the use of bitcoins and cryptocurrencies were people getting scammed and also had the fear of money being laundered through bitcoins," Nyirenda said. "All those issues were their major and primary concerns, but we also had solutions on how to work on that. But, they did not want to accommodate what we were trying to put across on the table as a contribution."

Prosper Chitambara of the Labor and Economic Development Research Institute of Zimbabwe says authorities are right to be cautious as cryptocurrencies are volatile and unregulated.

Prosper Chitambara of the Labor and Economic Development Research Institute of Zimbabwe says caution is key when using virtual currencies, in Harare, July 16, 2019. (Columbus Mavhunga/VOA)

"So, until and unless we have that infrastructure physical, and also the regulatory infrastructure to be able to regulate the activities around digital currency, l think it will be difficult for us to embrace it and for that to have positive spins-off for the country," Chitambara said.

But for investors like Kadengu, the benefits of cryptocurrency outweigh the risks, which to them are no worse than the uncertainty of Zimbabwe dollars.

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