Blockchain and crypto currencies need user cases in Zimbabwe that will satisfy all stakeholders by way of
benefit and by way of risk mitigation capability - our business people, our
different people in different geographical locations, our different people of
different financial literacy level, our people of different digital literacy
levels, our public administrators of the common purse, our politicians,
international trade partners and signatory to BIPPAs, multilaterals etc. Their story and
crypto’s story is yet to be written in the same language and indeed written in full.
There
is a place for all things digital and that place is present and more in the
future. Working with a common vision is what brings the future closer to
today.
There
still is a lot to be understood and the risks from crypto coin volatility make
any central banker crazy to have it in their monetary system. It is those fire
scenarios that crypto advocates and the risk averse policy makers need to
converge on.
There
is a lot of risk individual traders elect to carry in trading at this present
time. This risk however accumulates and aggregates as a national compound risk.
When it grows and shocks, this is upon the public administrator! Individualism,
behavioural economies and social trends then meet politics! The latter expected
to be the host giving full board as if it is always furnished and stocked up for this.
See
these conditions below:
In
the West, the proportion of people who can hold a loss position in coins beyond
their next income or more is greater than Zimbabwe. They will not need that
money in the next 30days and can wait for the next rally because bread and
butter is already covered, and at a national level, forex requirements for
imports are adequately covered with a lot of national forex reserves and
significantly greater export orders for months to come! That is not the story
for MaDzimbahwe!
Scenario time!
Now
imagine there are just 80,000 of us in Zimbabwe who get into the crypto
currency market with 45% likely needing to make withdrawals or sells before the
next income. Let us say they have made trades of US$75 on
average in various crypto coins. That translates to US$2.7m total being likely needed
by 36,000 households within the month of the US$6m invested/traded/speculated.
Now remember these conditions:
Poorer families are usually less diversified to manage their risks,
&
Speculative investments by poorer families at many times have weaker Due Diligence or require less due diligence if they are risk averse. This trend is likely changing with the emergence of Robinhood and Reddit traders. Some of the DD is widely available but some goes without being read or understood!
So remember the US$2.7m = 45% likely needing trades to be urgently closed back to fiat out of a total of US$6m (80k Zimbabweans putting up US$75 each). Also consider this number against forex outflow volumes for total national trade in the period, consider internal market’s rate of return (as a potential opportunity cost) and also the inflation rate.
Now the crypto market has its ups and downs. Imagine a rail line needing to pass through every high point it can find in Chimanimani - Manicaland. Beautiful place, but this isn't! It will really be kwire dzike kwiiiiire dzike dziiiiike nyuuureee kwiiiire dzike. You get the gist- that is the value trajectory on crypto market as a whole at present.
Worse for the earlier mentioned condition where trades are not well diversified - the Bitcoin chete chete portfolios, Etherium cc, Solano cc, etc. for the likely short term speculative trade in poorer households. Remember there are trading fees that for an average Zimbabwean would be high as well.
Stay with me, please as a home situation needs grafting into the scenario.
One of Zimbabwe’s key earning season is from around April to about August as tobacco and other agricultural produce is harvested and sold. Factoring in payment timelines, from May to September is the time this money is in people’s hands/accounts/wallets (and possibly think digital wallets) to manage, invest or spend. This is very key in how we as a nation; how we as the Zimbabwe of Agro-base and mining-base will be doing economically.
Now, that that farmers and miners with money reality is here, see what the crypto market can be like in the same period. The crypto market in the same period this year fell by 49% from its USD1.842 trillion highest point on 12 May 2021 to its lowest point in May around the 23rd - a market cap of USD0.937T.
For those needing their money at the end of the month including some of the example farmers and miners that would have thought of diversifying or multiplying at the start of May, that is a worst case scenario risk of that USD2.7m that went into buy positions coming back as USD1.37m. US$1.33 million has been lost to a sell-off!
That is farmers and miners sweat turned to grain, leaf and precious metal, cum money to the tune of USD2.7m! After a few clicks to buy and a few clicks to sell, because you now need to buy bread, uniforms plus inputs maybe for a winter crop; it is now US$1.33 million less! Somebody say it isn’t! Where did it all go?
Wealth transfer out of a nation if you bought the high from other countries and selling the dip to the same countries who are not Zimbabwe. And that was in 11 days. Do our internal markets lose that much?
Now if we say that required welfare higher-impact US$2.7m falls by the same percentage into required redemption period; US$1.33m (ZWL113 - 186m) would have been lost in total for 36,000 (45% of scenario investors) Zimbabwean individuals or households - Z$3,100 to Z$5,200 per individual! Now what does that translate to if that repeats itself quarterly in a year or more?
The Crypto market's capitalisation dipped to USD0.886 trillion by end of June. Now it has recovered to USD1.491T as of 01-09-2021; this is just over 80% of the value at entry - 20% loss if you did not get it. Can we afford that as a nation? The contract farmer has payments to make, the bank needs its money, the nation is expectant on a level of self-funding and sustainability for the next crop seasons and the next mining expedition. The fiscus now needs to find a way for the President to now fund the next inputs scheme. The opposition is stating this is a vote buying exercise, parliamentarians are debating the efficacy of state sponsored and controlled programmes, the schools are seeing fee defaults and children’s education being threatened etc.
We are back to the different stakeholders; see what responsibility they place on each other post such a financial system hurricane. Someone hanzi obva ati; "IMF do not give Zimbabwe any SDRs" on top of that! Chiri mupoto ndodya naniko? Chimbambaira....
Also imagine the scenario where transactions are quoted in the coins at big industrial player or national imports level.
Example being 1k oil barrels/BTC (Bitcoin). At BTC = US$35,000 that is looking for US$35 million for a million barrels of oil for our nice cars, ambulances, tractors, mining machinery, generators etc. But if the contract payment is due after a BTC rally now at US$52,000 you now need US$17m more! Chinzwa munhu; “Guys chihurumende ichi chakwidza mutengo wemafuta futi!” We can speak of using the Futures markets for the crypto but they bring downside risks as well and very complex to manage from a Zimbabwe situated in a place as big as this world. UAE, Qatar, Russia, Iran, Israel, USA, OPEC, UN, Paris Accord, climate change initiatives, green energy, Elon Musk tweets and all the spanners into the works towards Zimbabwe's desired oil price point by a certain date.
Well, that is the doomsday scenario preacher robe won enough and now it stinks of fear sweat!
There definitely is a case and use cases already showing potential benefits. These cases are suitable for Zimbabwe, feasible and should be acceptable to Zimbabwean users. NFTs have had use (but still with associated coin volatility risk) - this is not financial advice or any advice or policy challenge/promotion, but a mere observation!
Crypto coins still need a design that manages their value. Do they need to replace the ZWL? I perceive there could be room for both, especially where the fiat currency remains associated with high inflation downsides. A crypto coin by the Central Bank becomes a tool to allow citizens access to a store of value and value more internalised. Minerals managed-stock linked coins? Valuable, rare, not easily imitable and organised characteristics!
Are we able to replace mining bonds with mineral coins? Are we able to internationalise this and get investment linked to stock and future yields in the sector? The US$12B mining strategy integrating citizen participation and widened citizen equity to national development and positive international market trends?
I am
not an expert, but a citizen wondering. What if we…what will be?
If we…that could bite us - if we…that might help us. Only the type of thinking here.
Takamirira mhinduro dzevamwe.
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