Thanks to the magic of globalization and international commerce, anyone can now purchase a genuine Zimbabwe trillion dollar banknote issued by a central bank for the low, low price of 70 US dollars.
That statement may sound too good to be true. But, these bills were devalued in 2009 when the Reserve Bank of Zimbabwe abandoned its national currency. Even back then, the exchange rate of 100 trillion Zimbabwe dollars was no more than a few US dollars. This lead to the country’s extreme hyperinflation. If anything, they have become more valuable now as a novelty and collector’s item, with original banknotes selling for as much as $70-100 on Ebay and Amazon.
Hyperinflation: The Downfall of the Zimbabwe Economy
In the mid-2000s, the Zimbabwe government found itself battling inflation. By November 2008, the month on month inflation rate had ballooned to 79,60,00,00,000 (79 billion) percent. Two months later, the government began handing out licenses to shop owners. These grants authorized them to trade goods and services for foreign currencies. Over time, the number of accepted currencies grew to nearly a dozen.
While locals in Zimbabwe quickly moved on to using foreign fiat currencies for everyday transactions after 2009, the local government introduced a new interim currency called the RTGS dollar in February 2019. However, due to the public’s distrust, it quickly plunged in value against the U.S. dollar. As a result, even with the RTGS dollar in play, a sizeable portion of the country’s population continued to use foreign currency to pay for goods and services.
More recently though, in June 2019, the government issued a notice stating,
“The British pound, United States dollar, South African rand, Botswana pula and any other foreign currency whatsoever shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe.”
Meanwhile, year-on-year inflation in the country soared to 97.85 percent, according to data from Trading Economics.
Locals Turn to Bitcoin and Other Cryptocurrencies
Now that foreign currency is effectively outlawed in the region, locals have turned to the cryptocurrency market instead. Notably, the Reserve Bank of Zimbabwe banned banks from providing financial services to individuals and companies engaging in cryptocurrency trading back in 2017. This means that typically centralized exchanges like Binance and Coinbase simply cannot operate or even exist in the country. A once-dominant Zimbabwe exchange Golix was forced out of the region in 2018. It is still struggling to capture a strong market share in other African countries.
Instead, Zimbabwe residents have to trade cryptocurrency amongst each other on peer to peer exchange platforms such as Local Bitcoins. According to a report by Quartz Africa, locals prefer using mobile-based payment platform EcoCash to settle Bitcoin trades, with some even using international services such as PayPal, Western Union and Moneybookers to remit money outside the country. In light of increasing demand, the prices of various cryptocurrencies in the region skyrocketed briefly. Most notable, however, is Bitcoin is trading at a massive premium. And who knows? Maybe the region will transfer over to Facebook’s Libra asset?
Will you be picking up a $100 trillion Zimbabwe dollar banknote as a collectible? Let us know your thoughts in the comments below.