How A Central Bank Digital Currency Can Disrupt Corruption and Zimbabwe’s Economy

Whilst I am not a big fan of central banks joining in the cryptocurrency race through Central Bank Digital Currencies (CBDCs), I am conscious of the benefits such a move could bring to developing economies. A CBDC issued on a public blockchain would be a a win-win situation for both central banks and the public. International media was sent into frenzy in the past week with reports emanating from China that the Chinese government was in advanced stages of launching a CBDC. This will effectively trigger a digital currency race for which China might already be in the lead.

This week, Zimbabwe has seen new bank notes and coins come into circulation. The logistics in delivering the currency have been marred with problems- initially a bleep in meeting published timeframes for circulation and eventually claims of black market flooding of notes on sale at a premium with images spread across social media. The central bank, the Reserve Bank of Zimbabwe quickly scrambled resources to try and get ahead of a fast moving situation. A digital currency would have most likely overcome this problem and could also have brought other benefits which this article will highlight.

So far there are many governments researching digital currencies and they are all at different stages of this process, with some already trialing the technology in one form or another. The most beneficial and tried and tested method of delivering a digital currency is through blockchain technology. The first use case of blockchain technology was through the nascent crypto asset, bitcoin.

Fist Use Case

Although this article is not about bitcoin, it is important to highlight how this first use case can be adopted and adapted for a CBDC. Bitcoin was created by unknown persons or organisation operating under the pseudonym of Satoshi Nakamoto. It’s implementation solved the problem of double spending- which fiat currencies still suffer this day through counterfeiting. The bitcoin network functions through a mechanism of consensus whereby 51% of the network confirms a transaction to validate its authenticity and these are referred to as nodes.

A blockchain is simply a distributed ledger whereby computers spread across a global network store a piece of data about a transaction on a network. Since these computers are spread across different geographical locations, it is difficult to compromise the bitcoin network as one would have to conspire with 51% of the actors on the network-something which is nearly impossible hence blockchains are said to be hack-proof and immutable.

Anyone with a computer can help secure the bitcoin network by downloading the node software to undertake what is commonly referred to as mining. Miners are powerful computers which secure the network and gain bitcoin as an incentive for performing the task.

Adaptation of blockchain technology for CBDCs

A central bank can commission a blockchain project and distribute the software for trusted nodes to selected independent institutions. These institutions can be local banks and other credible organisations like government departments, embassies abroad and selected charity organisations. Such a blockchain can provide the central bank with very useful data on distribution dynamics of a national currency.

Tools can be deployed including bots which can generate data on circulating supply, alerts on large sums movements and also data on areas where most financial activities are taking place. In the most recent situation where cash ended up on black market in large quantities, this data could have been generated in real time.

Data of this nature is very useful not only in targeting crime such as cash hoarding but also knowing where supply needs to be increased to cope with demand. These are also essential tools for monitoring activities of banks, which can empower the central bank in discharging its supervisory role without expending already scarce resources.

The diagram below shows how a public blockchain distributed CBDC system can look like. Public keys do not show who is behind the wallet but can show all transactions in and out of each wallet. The public can see funds movement in the hierarchy from the central bank to the smallest holding in customer wallets.

Africa Blockchain Media - CBDC


A long accepted principle about a currency is that its success depends on public confidence. The reason why people choose United States Dollar globally is partly because of the confidence people have in the US economy. For centuries, this confidence is what has sustained USD hegemony. In Zimbabwe, trust in public institutions has been at its lowest level for a long time.

The public have seen trust broken on several instances with disastrous effects such as loss of life savings, pensions and ‘raiding’ of foreign currency accounts by the authorities. Transparency is what is needed to try and rebuild that trust. Blockchain technology can go a long way in re-establishing trust once again. A public blockchain brings transparency and this is a good starting point.

The idea of making data available for people to know how much money has been issued and when more money is being minted by the central bank can help with public confidence. Data such as funds allocation to ministries can be made public through a blockchain. The public can see how funds get dispensed which can enable citizens to scrutinise how funds are being managed and to hold the government to account.


A CBDC would bring efficiency to the system. Instead of paying millions to companies based abroad to print money, all that is needed is a dedicated technology team of developers who can deploy the technology and maintain the network. Printing money costs a lot of money and it has been reported that the recent printing round cost around $150m USD (unconfirmed).

Apart from initial printing costs, notes get damaged and require replacement every now and again. With a digital currency, the authority will issue once and that’s the end of it. One can reduce supply by destroying a currency through ‘burns’ or minting more to increase supply whenever this is required.

Then there is the issue of counterfeiting, which can become history with a digital currency. A digital currency can also benefit cross border trade. If it is backed by a physical asset such as gold or diamonds, a central bank can enter bilateral agreements with regional central banks so that they can accept the currency to facilitate trade and liabilities can be settled by delivering the physical asset (bartering). In this way, you get to forget about trade barriers imposed by sanctions.

Lastly on efficiency, if the blockchain has a functionality for freezing funds-which the Central Bank would definitely want to have-funds can be frozen without a need for long winded bureaucracy. Orders can be made following due process and criminals get stopped in their tracks before siphoning funds.

Wider use of the blockchain

Once a commissioned blockchain is in place and functional, it opens a whole world of opportunities for private and public sector entities who can build Developer Apps ( DAPPS) and second layer applications on top of the blockchain to aid the economy in various ways. One can have lending platforms which can connect borrowers with lenders, digital identity solutions can be built on the same blockchain and you can have solutions such as those for managing land ownership records. Food supply chain tracking and drug supply chain tracing applications can be built to disrupt sell of fake pharmaceutical products.

The public sector could also build on the same blockchain and manage data such as medical records, court judgements and data for the delivery of other essential public services. Universities could utilise the platform to hold qualification records and managing research materials. Tax authorities can also gain data for revenue collection from the blockchain and run tax audits to disrupt tax evasion.

Through blockchains, most tasks can get automated with little effort. In insurance sector, use of blockchain technology could enable the deployment of smart contracts in various scenarios. A good example being where someone dies with life insurance or a burial policy. A smart contract could be triggered to execute when the central authority issues a death certificate leading to a payment being made to beneficiaries without having to deal with a lot of bureaucracy. Blockchains open a door to a whole new world filled with unimaginable opportunities.

It is worth dedicating a whole paragraph on having land records easily accessible on a blockchain as this has the potential to unlock value in land. Making data available on who owns what in terms of real estate can be a game changer as it can enable farmers to access funding easily from lenders. Following the land reform, identifying ownership of land is pretty much a hit and miss. Criminals are capitalising on this situation and stories of people selling land which they don’t own are common place. This sort of data can be relied on by lawyers in conveyancing and it can also hold information for agricultural purposes such as suitability of land for growing certain crops. In urban areas the data can enable banks and lenders to put security on land and houses rather than simply relying on taking title deeds. It can enable home owners to easily use their property as collateral to access loans.

It is clear that this technology has a lot of benefits, however, it requires a national strategy like what the Chinese government has recently announced- an ambition to make China the leading blockchain nation in the world. This is a worthy area to direct public funds rather than a national space programs which will take years to develop and deploy with little benefits to the nation. Blockchains can aid the economy in many ways.