Zimbabwe laments mobile gambling's impact on revenue

8 October, 2020

Zimbabwe finds itself in an interesting position related to both gambling and cryptocurrency. People in that country gamble, but the government isn't realizing as much revenue as they would like because a growing percentage of gamblers are choosing to gamble online using their mobile devices. Meanwhile, younger people in Zimbabwe are warming up to cryptocurrency rather quickly.

The dual threats present a real revenue problem for Zimbabwe if government officials don't do something. There is already talk of establishing a framework to regulate crypto, but nothing has been heard on the gambling front as of yet. Common sense suggests government leaders will have to come up with something at some point. It is really just a matter of what they come up with.

At the forefront of their dilemma is technology just reaching African nations. Things are changing fast, thanks primarily to a younger generation that is not afraid to embrace things like mobility and digital money. Government leaders tend to be older people. And older people tend to be more averse to new trends. Thus, you have a younger Zimbabwean population open to cryptocurrency and mobile gambling being led by an older generation content to keep things as they are.

Gambling in Zimbabwe

Unlike some other countries in the world, Zimbabwean law does not address online gambling one way or the other. Land-based gambling is explicitly legal by law, and there are plenty of opportunities to gamble at land-based operations in the country. But online gambling is neither explicitly legal nor illegal. Law simply doesn't address it.

For better or worse, this creates a 'do as you will' environment in which online operators can freely set up shop and target Zimbabwean players. Gamblers can freely visit domestic and foreign gambling sites and play games as they see fit.

This is obviously a good deal for the online gambling industry and players supporting it. From a purely business standpoint, it is capitalism at its finest. Yet it is not so good for Zimbabwe's government. They rely on gambling taxes as part of their revenue stream. While a system is in place to tax land-based casinos, there is no ability for the government to tax online operators.

Cryptocurrency in Zimbabwe

Until recently, Zimbabwe practiced the same hands-off approach to cryptocurrency. All sorts of tokens were freely bought and sold by way of both domestic and foreign exchanges. Cryptocurrency and blockchain businesses operated pretty freely as well. However, events from 2019 summer have caused government leaders to embark on a path of crypto regulation.

In July of that year, Zimbabwe's government banned all foreign currencies in an effort to protect the value of its own fiat. That led to hyperinflation almost overnight. Concerned Zimbabweans, not wanting to experience what their counterparts in Venezuela had been through, began putting their money into cryptocurrency - particularly Bitcoin.

According to Bitcoinist, BTC was trading at 600% premium at the height of the panic. Not long after, the government clamped down on Forex trading and banned mobile cash, the practice of converting mobile phone balances into hard cash.

The turmoil really put the spotlight on cryptocurrency as an alternative to a fiat that might eventually crash and burn. Fearing the possibility that cryptocurrency could further devalue Zimbabwean fiat, government leaders decided in the spring of 2020 that they needed a comprehensive cryptocurrency regulatory regime.

Even now, regulators are putting together a framework. It is expected to cover everything from exchanges to taxation. The framework might also lay out how businesses wanting to deal in cryptocurrency can conduct business. We will have to wait for the details to know exactly what's coming, but regulation is coming, nonetheless.

Gambling and cryptocurrency together

Lost gambling revenues and the emergence of cryptocurrency are seen separately as big problems by Zimbabwean government officials. But combined, they create an even bigger problem. The combined problem is seeing more money leave Zimbabwe as young people purchase cryptocurrency and use it as gambling funds.

It must be noted that a surge in mobile phone use has helped fuel bold online gambling and cryptocurrency use over the last 12 to 18 months. Apparently, land-based gambling in Zimbabwe enjoyed only limited popularity because of a long-standing social stigma attached to gambling of any type.

Simply put, gambling is viewed in Zimbabwean culture as a vice. And even though cultural values are changing, a large percentage of the population would not want to be seen entering or leaving a casino. Thus, the interest in online gambling with mobile devices.

Younger people in Zimbabwe are less likely to be bothered by cultural attitudes toward gambling. Even so, having access to online gambling sites gives them more opportunity to gamble while keeping such activities private. Throw mobile phones into the equation - especially in a country where desktop and laptop computer use are below average - and you have a market perfect for online gambling.

Mobility has also brought cryptocurrency to the masses in Zimbabwe. Like consumers in any other country, Zimbabweans can download an app that allows them to create their own digital wallets and trade coins as they see fit. Doing so is neither complicated nor time-consuming.

Growing numbers of online casinos accepting Bitcoin deposits only encourages younger people in Zimbabwe to do all of their gambling online. This cannot sit well with government leaders who seem to always be dealing with economic crises. As such, it will be interesting to see what their eventual cryptocurrency regulations look like.

In an ideal world

Let us assume, for the purposes of this post, Zimbabwe is an ideal world in which everyone gets what they want. What would future gambling and cryptocurrency regulations look like?

Starting with the gambling aspect, the government would recognize online gambling as legal and then establish minimum regulations to hold operators accountable. The regulations would be as noninvasive as possible with the sole intent of protecting gamblers against fraud. The regulations would also allow for minimal taxing of gambling revenues in order to satisfy the government's need for funding.

Gamblers in Zimbabwe could access domestically hosted sites at will. They could use a whole host of payment systems including bank transfers, debit and credit cards, digital wallet services, and even cryptocurrency.

On the cryptocurrency side of things, digital currencies would be recognized as legitimate and legal payment options. In a perfect world (with perfect being better than ideal) at least one cryptocurrency would be recognized as legal tender. Perhaps that is asking too much.

At any rate, exchanges would be able to operate freely as long as they adhered to minimal regulations designed to, once again, protect consumers from fraud. This would give consumers the opportunity to buy and sell tokens on demand.

The end result would be an online gambling industry partially fueled by cryptocurrency. Younger people would be at the forefront of the new revolution. Meanwhile, Zimbabwe's economy would be helped by a stronger gambling sector and less money leaving the country.

Reality will have the final say

Zimbabwe represents an opportunity to find a way to craft regulations in such a way as to make everyone happy. Few countries have the opportunity now presented to Zimbabwe. What will regulators come up with? Nobody knows. But ultimately, reality will have the final say.

There is no denying the reality that Zimbabweans would rather gamble online than go to a land-based casino. Erase the social stigma that comes with gambling and you might change that. Otherwise, online gambling is likely to dominate the gaming landscape within the next few years.

There is also no denying that Zimbabwe's fiat is not as strong as it could be. Until systemic changes are made, the risk of hyperinflation will remain. That will only serve to drive people to BTC and other cryptocurrencies in the months and years to come. Something has to be done to restore consumer confidence in the country's fiat.

Not allowing Forex trading is not the answer. Neither is making it harder for people to buy and sell with BTC. Let us hope government officials do not go that route. If anything, encouraging consumers to embrace new payment systems is good for national economics because it encourages local economic activity.

Striking a regulatory balance

Address the dual concerns correctly and there's no reason Zimbabwe's government has to continue lamenting online gambling and the subsequent loss of revenue it generates. There is a way to work all of this out to everyone satisfaction. The secret is to offer consumers adequate protection without exercising draconian control over business interests.

It is all about striking a regulatory balance. For example, cryptocurrency offers a tremendous amount of potential as a global payment system. Its security and transparency make it superior to other payment systems in a number of ways. At the same time, neither cryptocurrency nor blockchain are perfect. Both are open to technical flaws and security breaches. Government assumes some responsibility for protecting innocent consumers.

It is possible to develop regulations that hold operators accountable so as to protect consumer interests. But those regulations do not have to unnecessarily restrict cryptocurrency's potential just to protect fiat. In other words, there don't have to be any losers here. It is up to regulators to decide if that is going to be the case.