Cryptocurrencies can become an alternative to legal tender in countries facing high inflation. There are several examples of such more or less successful attempts around the world.
Zash, an anti-inflationary cryptocurrency in Zimbabwe
One example is Zash. It stands for Zimbocash, a cryptocurrency that aims to become a popular means of payment in Zimbabwe and thus face the hyperinflation that the country has been facing for years.
In 2015, the country got rid of the Zimbabwean dollar to use only the US dollar or the South African rand. To illustrate how high inflation was, it is enough to know that 175 million Zimbabwean dollars were exchanged for 5 US dollars.
To reverse this imbalance, the country was born Zimbocash. It is a decentralized cryptocurrency based on the Tron blockchain. It has a fixed supply of 4.5 billion tokens. Its goal is to become a means of payment.
Users who register on the official platform receive tokens that they can spend or sell (Zash is listed on Bithumb). However, the system aims to promote its use as a means of transferring money.
Its promoters’ dream is to ensure that Zash can coexist with local currencies and become complementary to them.
Local Economy Minister Mthuli Ncube recently said he was in favor of using cryptocurrencies. In his opinion, they could be a solution to reduce the cost of money transfers. However, there is no indication that the government would then opt for Zimbocash.
The case of Venezuela and Petro’s experiment
Venezuela tried to fight against inflation with the cryptocurrency Petro, and Maduro’s intuition made it possible to use Petro instead of other cryptocurrencies. According to some surveys, Petro is better known and used among locals than BTC.
Although there are doubts as to whether Petro is actually supported by an adequate amount of oil (which is the reason for her name), the cryptocurrency seems to be growing in Venezuela in addition to the local currency, the bolivar.
Salvador – BTC coexists with the dollar
Venezuela decided to spread its own cryptocurrency among the population, and Salvador chose BTC. Since September 7, the BTC has coexisted as a means of payment with the US dollar (El Salvador no longer has its own currency, which was also destroyed by hyperinflation years ago).
The election of President Bukele was driven by the need to find a system to strengthen his fragile economy. With the introduction of BTC, the president estimates that he will save his fellow citizens up to $ 400 million a year on commission costs incurred in remittances. For a country of 6.4 million people, this is no small feat.
Cryptocurrencies and the fight against inflation
BTC and cryptocurrencies are proving to be an alternative system to inflation and are useful in improving economic conditions. This is evidenced by the cases of El Salvador and Venezuela.
However, much skepticism still needs to be overcome. Strong states, instead of allowing the spread of cryptocurrencies, work on their own digital currencies (CBDC). Weaker countries due to their economic situation are more open to cryptocurrencies.