After scrapping the national currency in 2009 when its inflation rate soared to an unbelievable 89 sextillion percent, Zimbabwe turned to foreign currencies which was a breath of fresh air for those who saw their savings become worthless. But now, the African country is facing an unprecedented cash crunch leaving many to search for a solution.
At the end of 2016, Zimbabwe’s central bank began issuing “bond notes,” or “bollars,” a paper currency-like note officially carrying the same value as the U.S. dollar. Backed by a loan of US$200 million from the African Import Bank, the notes were created in an attempt to ease shortages of U.S. dollars and South African rand.
The small denomination “bond notes” are not easily exchangeable in the market, leading businesses to turn to the black market to sell the notes at a premium in order to secure U.S. currency to purchase imported goods. This has forced higher prices on customers paying with the “bond notes.”
Chantelle Matthee, an analyst at NKC African Economics in neighboring South Africa, explained: “Firms’ prices reflect that one U.S. dollar in hard cash is equivalent to $1.30 in bond notes, meaning that the surrogate currency has already lost 30 percent of its value.”
While officially consumer prices rose only 0.6 percent year-on-year, in the real world, there are reports of merchants charging upwards of 40 percent for goods.
Zimbabwe’s government took this crisis to the next level, however, when diving into the electronic payment system. Nicknamed “zollars” by economists, the central bank began creating dollar surrogates lacking sufficient dollar or gold reserves as a backing.
As the rumor mill churned, word began to spread that the government had run out of U.S. dollars and was buying up black market dollars to hedge against their failing system. These rumors sent the price of “zollars” plummeting, placing a steady 20% premium on greenbacks, leading many to recall the 2009 economic crisis.
Jethro Nkosi, a computer technician in Harare noted: “I am really scared that I will wake up one day and find my money in the bank is worthless,”
Amid this cash shortage, President Mugabe announced a huge shake-up in the administration, axing 3 ministers, including finance minister Patrick Chinamasa. Additionally, Mugabe created a new cyber ministry, focusing on cybercrime and monitoring of social media.
The move to create a cyber ministry was largely rooted in controlling what the administration suggested was the spread of misinformation including the previously mentioned rumors, which government suggested created panic buying and price increases.
While Mugabe’s administration struggles to gain control of its financial woes, many citizens of Zimbabwe are turning to alternatives.
As it becomes increasingly difficult to engage in foreign trade, many businesses are facing collapse. Because of this, a number of savvy industrialists are looking to bitcoin to engage in international trade and preserve their wealth.
Businesses and individuals scrambling for solutions has since sent the exchange rate skyrocketing in Zimbabwe. On Monday, October 16, the current rate on the country’s primary bitcoin exchange, recently renamed Golix.io is $10,000USD/1BTC. It is worth noting that the trading price on Zimbabwe’s Localbitcoins.com is about equal to the globally weighted average.
Despite the premium on the country’s only exchange, bitcoin is gaining speed in Zimbabwe. As the country’s banking system faces increased scrutiny and international transactions become more difficult, the cryptocurrency offers a new solution which could change the face of Zimbabwe’s financial system.
Bitcoin advocate and Zimbabwe based economist Philip Haslam explains: “The thing about bitcoin is once you import it into the country, you don’t have the problem of the currency eroding and perishing like you have with notes — It’s a system that allows for privatized banking.”
Over the last half century, Dubai has transformed itself from a small desert city to a sprawling metropolis of 2.7 million people. The government has truly leapfrogged on the back of technology.
Indeed, Dubai has caught tech fever in a serious way. Earlier this year, the city announced that it will be flying automated taxis, and recently, Dubai even unveiled its own robocop prototype. While these pieces of our sci-fi dreams are finally becoming a reality, it is clear that, for Dubai, the city is moving according to plan.
With its tremendous growth and daunting logistical challenges, Dubai has had to be innovative in importing its water, managing healthcare, education, housing and even in building its renowned skyscrapers to prevent them from sinking into the soft sand or being damaged by harsh winds. In doing so, the emirate has become a globally competitive city, attracting an incredibly skilled foreign force from across the globe.
Both Dubai’s economic success and infrastructure tech success, however, can be traced back to its tremendous oil reserves. Containing the bulk of the world’s oil, the Arab Gulf is not an easy place to drill.
Following in Abu Dhabi’s footsteps, Dubai discovered oil in 1966 after years of exploration. The country relied on what was then advanced technology to access its reserves, and the resounding success of its oil endeavors led to tremendous wealth for the emirate. Reliance on oil, however, has led to its own challenges.
Seeing that its reserves were not finite while acknowledging the looming issue of global warming, Dubai has reduced its dependence on oil significantly. Oil accounted for 24% of the country’s GDP in 1990, and the UAE now plans to commit to 0% of its GDP in the near future. This massive transformation has been fueled by its technology initiatives.
In 1999, Dubai launched its ICT strategy which led to the development of Dubai Internet City. DIC is a free economic zone within the city which has provided tax and customs incentives to draw tech giants from across the globe, creating a hub for tech-minded startups. Dubai’s Internet City was such an economic success that the country also launched Dubai Media City and Dubai Science city, separate economic zones focusing on their namesakes.
In keeping to its commitment to technology, Sheikh Mohammed bin Rashid Al Maktoum launched the Dubai Smart City initiative in 2013. In a collaborative approach between the public and private sectors, the city has embarked on a number of projects focusing on increasing happiness, growth, and functionality.
With the city already boasting over 1000 e-services from securing licenses, paying fines, signing contacts and more, Dubai is already well on its way to realizing its Smart potential.
More recently, the emirate has rolled out smart traffic lights using the Internet of Things, increasingly widespread internet connectivity, a blockchain-based real estate sector, and more. Its most ambitious projects, however, are still in development.
In realizing its Smart City dreams, Dubai hopes create a platform which will connect its citizens to public transportation, reduce energy consumption, create online libraries and resources for students, and allow businesses to share resources. Additionally, Dubai is looking to integrate its whole government using blockchain technology to increase efficiency, transparency, and transform its economy.
“We want to make Dubai the first blockchain-powered government in the world by 2020,” Aisha Bin Bishr, director general of Smart Dubai, noted.
This blockchain strategy has led to the creation of emCash, the emirates’ first state-sponsored cryptocurrency.
Ali Ibrahim, Deputy Director of Dubai Economy announced in a press statement: “Founded on the latest block chain technology, emCash will be the digital currency in emPay wallet, launched by Emcredit to support contactless payments. emPay allows UAE residents to make varied payments, from their daily coffee and children’s school fee to utility charges and money transfers, through the near field communication (NFC) option in their phones. With emCash, emPay users will have the option of a secure digital currency, and merchants receive such payments in real time without going through intermediaries.”
EmCash will act as a seamless payment method for everyday payments, reducing settlement times, costs, and increasing flexibility and security.
With the introduction of its own encrypted digital currency using blockchain, Dubai is making tremendous progress in its Smart City initiative. While there is still 3.5 years of waiting until these goals are fully realized, Dubai’s experiments in the fintech realm will surely act as a model for other cities looking to take advantage of these emerging technologies.
Cash is expensive. And across the world, countries without currencies often have to pay huge premiums just to use another country’s money. But a new trend has emerging in the digital era; many of these countries are looking toward the crypto-realm for a solution.
In the years following the Oslo I Accord, signed in 1993, Palestine’s political system was implemented, the Palestine Monetary Authority (PMA) was created, Palestinians were issued passports, and finally, in 2015, the UN raised Palestine’s flag. But the country still lacks its own currency.
Since the termination of the British Mandate for Palestine, the country has used multiple currencies in different frequency depending on the region. Three main currencies are common throughout Palestine; the U.S. dollar and Jordanian dinar are most common in higher value purchases such as houses, land, or cars, while most day to day transactions will involve the new Israeli shekel (NIS). This is due to 1994’s Paris Protocol which gave Palestine a central bank, however without the capacity to issue its own currency, forcing a dependence on the Israeli economy.
The Protocol on Economic Relations, originally supposed to last only 5 years – but still in place today – is an agreement between the Palestine Liberation Organization and Israel. The protocol essentially merged the economies of Israel and Palestine, with Israel remaining in control. A key negotiation was a measure that which allowed Palestinians to continue work in Israel.
The protocol regulates taxes, labor, agriculture, and industry. Israel acts as Palestine’s trade conduit and dictates all taxes and VAT on goods imported through Israel. This system has created an advantage for Israel, with the country abusing the clearance system for political reasons, withholding revenue payments which severely impacted the Palestinian economy.
With no currency of its own, circulating and spending money in Palestine is not as easy as it may seem. Most stores do not accept credit or debit cards and withdrawing cash from 3 out of 4 of the country’s major banks will leave the recipient with Jordanian dinar which will then need to be converted to NIS.
Not only is the process complicated, but it is expensive. The official newspaper of the Palestine National Authority, Al-Hayat al-Jadida, explained that the country loses $1.6-billion every year due to its lack of its own national currency.
Because of the tremendous challenges involved with not having a currency of its own, Palestine has announced an initiative to create a currency inspired by bitcoin technology.
Early 2017, Azzam Shawwa, the Governor of Palestine Monetary Authority, announced the intention to develop a digital currency within the next 5 years.
Shawwa noted: “That is something we would like to see; It will be called the Palestinian pound.”
The PMA is still weighing its options. While creating its own cryptocurrency could be a promising fix, the authority is also looking to accepting up to 4 currencies, or adopting one as its primary. The complications with Israel and the inability to actually print its own money make the digital currency solution very appealing for the PMA.
“If we print currency, to get it into the country you would always need clearance from the Israelis and that could be an obstacle; So that is why we don’t want to go into it,” said Shawwa.
As the Palestine Monetary Authority mulls over the idea of the Palestinian pound, it remains unclear of how it would impact the Paris Protocol, but it could provide the country with an option to forge its independence both in identity and on an economic level previously unobtainable.
While simply using bitcoin presents several challenges through its fees and the amount of time to process transactions, cryptocurrencies are quickly becoming a reasonable solution to difficult economic issues which countries without currencies are experiencing.
Max Keiser wrote in 2013: “The Palestinian economy is a multi-billion-dollar economy that unfortunately benefits mostly outsiders. But if Bitcoin were adopted as the official currency, Palestinians would be able to shape their own economic destiny and in so doing their sovereign destiny.”
This is re-published from Elaine’s Idle Mind. Editor’s note: In a time of crypto unrest due to regulatory crackdowns, this is a gentle refresher on the concept of decentralization through the lens of alternative virtual economies
Long before the age of billion-dollar Bitcoin mines, China was the world’s richest source of World of Warcraft gold.
WoW gold is a virtual currency that players use to buy weapons and animals for in-game missions. The currency is normally earned by completing challenges and killing monsters, but professional “farmers” spend their days performing rote tasks to acquire gold which they resell for US dollars. For a while, Chinese prison guards forced labor camp inmates to play Warcraft so that they could harvest the gold. Even Steve Bannon helped run a gold farming business.
There’s more: Each game server features an auction house, where gold can be used to buy tokens redeemable for digital goods and access to other Blizzard games. Tokens trade in a real-time market. It’s not that different from the ether-ICO economy, except that central banks haven’t tried to ban World of Warcraft.
A number of countries now want to control how people invest their digital currencies, but they will fail. Fiat authority is not transferable.
Just like money is a shared hallucination, so is authority. It makes no difference whether players are using virtual gold to buy virtual swords to join virtual guilds; or if they’re using virtual ether to buy virtual tokens issued by virtual companies. The only way to assert authority over a Warcraft realm is to become a max-level paladin, and the only way to assert authority over a decentralized currency is to control 51% of the nodes.
As a reminder, here is a handy guide from Mircea Popescu on how to interact with fiat institutions that attempt to claim jurisdiction over virtual realms.
A history of World of Warcraft’s gold economy –Memory Insufficient