In late November, after a week of military house arrest, Zimbabwe President Robert Mugabe stepped down from office. Mugabe’s resignation follows 37 years of failed policy that led to crippling inflation and high unemployment in the once-prosperous southern African country.
Many Americans were blissfully unaware of the revolution taking place in the sub-Sahara, although cryptocurrency markets were watching. As an inherently non-government-backed store of value, cryptocurrencies often take the spotlight in moments of civil unrest.
As news spread that Mugabe was put under house arrest, crowds of people queued outside banks and waited overnight to withdraw savings.
Although Zimbabwe abandoned its own currency in favor of the U.S. dollar in 2009, in 2016, the government demanded that banks deposit their U.S. dollars with the central bank in exchange for a new currency known as “zollars”. This meant that everyone holding U.S. dollars would now receive less valuable zollars instead.
Zimbabweans, who had trusted their banks to hold their money for them, watched helplessly as the value of their bank accounts collapsed. For countries in economic trouble, the temptation for the government to rob their own banks can be very strong.
In another example, in July 2013, the Cypriot government taxed some bank deposits by more than 40% to bail out the country’s banking industry.
The recent financial crisis in Zimbabwe demonstrates the continued need for digital currency, which cannot be confiscated.
One of the major use cases for cryptocurrency is that it provides a way for individuals in countries with untrustworthy governments and financial systems to store money without the risk of government confiscation.
As governments around the world continue to face pressure from dissatisfied citizens, the demand and use of digital currencies such as bitcoin and ethereum will continue to grow.