The Reserve Bank of Zimbabwe has announced plans to launch a gold-backed digital currency to aid in the stabilisation of the country’s local currency. According to The Sunday Mail, the move is part of the government’s effort to reduce currency volatility, which has been a major issue in Zimbabwe for more than a decade. The gold-backed digital currency is expected to allow more Zimbabweans to hedge against currency volatility by exchanging small amounts of Zimbabwean dollars for the digital gold token.
The Governor of the Reserve Bank of Zimbabwe, John Mangudya, explained that the plan aims to “leave no one and no place behind.” This move is expected to benefit the local economy and reduce inflation, which reached a one-year low in March this year, standing at 87.6%, down from 92% in February. Mangudya expects the parallel market exchange rate to stabilise once tobacco farmers receive their US dollar payments in the coming weeks. He explained that the current volatility in exchange rates is due to “expectations of increased foreign currency supply” on the market as a result of the tobacco season.
Zimbabwe’s introduction of a gold-backed digital currency comes at a time when the country has been grappling with currency volatility and inflation for more than a decade. Following a period of hyperinflation, Zimbabwe adopted the US dollar as its currency in 2009. In an effort to revitalise the country’s struggling economy, the Zimbabwean dollar was reintroduced in 2019. Last year, the government decided to reintroduce the US dollar in an attempt to cool the country’s soaring prices.
According to a Wall Street Journal report from March, the lack of changes in Zimbabwe’s monetary system has led businesses to print their “own money,” often on handwritten scraps of paper, so that users can pay for future purchases. As a result, the introduction of a gold-backed digital currency as legal tender in Zimbabwe is expected to provide some level of stability to the country’s currency.
As a result of economic challenges, crypto adoption has increased in many African countries. According to Chainalysis, the Middle East and North Africa are the fastest-growing regions for cryptocurrency adoption, with over $566 billion in crypto transactions between July 2021 and June 2022, representing a 48% increase over the previous year. Cryptocurrencies provide a way to bypass traditional banking systems and transfer money across borders, making them an appealing option for many in developing economies.
Finally, the introduction of a gold-backed digital currency in Zimbabwe is expected to aid in the stabilisation of the country’s local currency, which has been plagued by currency volatility and inflation for more than a decade. This move is part of the government’s effort to slow the local currency’s depreciation against the US dollar. The use of cryptocurrencies is increasing in many African countries, and the introduction of a gold-backed digital currency in Zimbabwe is expected to provide some economic stability.