Zimbabwe Finance Minister Mthuli Ncube has announced plans to reduce the country’s cash shortage by launching a cryptocurrency to incentivise investment.
“Zimbabwe should be investing in understanding innovations and often central banks are too slow in investing in these technologies,” says Ncube. “But there are other countries which are moving faster. If you look at the Swiss central bank, they are investing in and understanding Bitcoin.”
Ncube noted that in Switzerland “one can pay for travel using Bitcoin. So, if these countries can see value in this and where it’s headed, we should also pay attention. We have innovative youngsters so the idea shouldn’t be to stop it and say don’t do this, but rather the regulators should invest in catching up with them and find ways to understand it, then you regulate it because you now understand it”.
Liquidity crunch and cash shortages
The African nation faces a liquidity crunch and cash shortages caused by the depletion of Nostro accounts (these are accounts banks hold in a foreign currency in another financial institution) as exports drop and there has been an over-issuance of Treasury Bills to fund government spending. Banks have responded to these issue imposing strict withdrawal limits. Zimbabwe’s Ministry of Finance and Economic Planning has revealed that the country is 96% cashless.
Ncube has promised to push the Reserve Bank of Zimbabwe (RBZ) to create a cryptocurrency division tasked with helping the country’s central bank to better understand virtual currencies. People in Zimbabwe prefer to hide their cash under their mattresses rather than using banks, an issue that exacerbates the country’s cash shortage.
Ncube faces a challenge in convincing the RBZ to launch a cryptocurrency because it prohibits banks from processing crypto transactions. “Further, cryptocurrencies can be used to facilitate tax evasion as well as an externalisation of funds in violation of a country’s laws,” the RBZ has said. Later, however, the Zimbabwe High Court reversed the ban, but regulatory uncertainty prevails.