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Zimbabwe government looks to own digital currency, not crypto

by Staff Reporter
17 Dec 2021 at 11:53hrs | Views
As digital currencies expand and become mainstream and normalised, it is not going to be unusual to find governments around the world considering the benefits that such a currency could offer their citizens. One such government considering this is that of Zimbabwe, but it is important to note that they are not interested in adopting cryptocurrencies. Is there a difference? Let's take a look!

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What is a Digital Currency?

Strictly speaking, cryptocurrencies are digital currencies. However, not all digital currencies are crypto, which is why Zimbabwe is interested in what these have to offer without wanting to adopt crypto.

There is no denying that we live in a world that is increasingly moving online. We and the governments watching over us have to be prepared for these changes as they occur, and this can mean embracing changes like digital currencies.

There are several advantages to doing so. Primarily, they have fast transfer and transaction times. This allows for exchanges to take place at an accelerated rate compared to what we typically see with paper currencies. They also do not have to be physically made. A transaction can always be rejected because of a ripped or soiled banknote, but this cannot happen with digital currencies since they have no physical counterparts.

This can also be beneficial for those who live rurally, like many in Zimbabwe. Having access to a digital currency could make transactions much easier for them to manage, and they would not have to worry about needing access to a bank as they would be able to access their accounts through the internet.

How Does This Differ from Cryptocurrencies?

So, how does the type of digital currency that Zimbabwe wishes to introduce differ from a cryptocurrency? It is quite simple. Zimbabwe and other countries that want to introduce digital currencies want to create centralised currencies, sometimes called central bank digital currencies or CBDCs. These digital currencies are issued by the central bank of their respective currencies, just as fiat currencies are. This could be in addition to the fiat currency rather than fully replacing it.

A cryptocurrency is decentralised, so this means that it cannot be attached to a central bank. It makes use of cryptography to protect and verify transactions made, whereas this would be handled by the bank with a digital currency.

There are some advantages to the cryptocurrency system. If you want to know precisely how do you pay for goods and services with crypto, or indeed how do you play poker online, you might end up looking into sites that will allow you to pay with cryptocurrency. It is one of the more secure ways that we have to pay for goods and services online, though it is not entirely mainstream just yet.

Why Don't Countries Like Zimbabwe Want to Adopt Cryptocurrencies?

Due to the inherent anonymity of cryptocurrencies, many countries like Zimbabwe are cautious when it comes to crypto. That, coupled with their decentralised aspects, make crypto difficult to regulate. The central banks of countries looking to introduce digital currencies want to offer something that they can control and regulate properly for the benefit of their customers. This is why many are looking into the potential adoption of CBDCs.

Digital currencies could be very useful to countries like Zimbabwe where the local currency has a tendency to weaken. The Zimbabwean dollar has weakened by 29% over the past year, and there are concerns that it will continue to do so.

Introducing a digital currency might be the right plan to fix these issues. Though they have a tendency to be a bit volatile, they can offer a fantastic alternative to a fiat currency. For economies like Zimbabwe's, it might be helpful to have the two to play off against each other as they grow.

Adopting a Digital Currency

Zimbabwe's ministers have made it clear that they want nothing to do with cryptocurrencies. Though they are becoming more popular, it is difficult to regulate and control them. Due to this, it is obvious why banks are nervous about the impact that they might have.

However, there is no denying that we are in need of a modern financial solution. The answer here definitely lies with digital currencies and CBDCs. Zimbabwe is not the only government considering adopting a digital currency in the near future. England and Sweden are amongst the other countries that are looking into what these might offer. It is worth keeping an eye on these developments. Who knows how the widespread adoption of CBDCs might affect cryptocurrencies and other forms of online payment.

Source - Byo24News