The Reserve Bank of Zimbabwe has announced plans to issue a gold-backed digital currency to be used as legal tender to help stabilise its local currency.
According to local media outlet The Sunday Mail, the Reserve Bank of Zimbabwe has begun plans to bring a gold-backed digital currency so its government can stabilise the local currency from continued depreciation against the US dollar.
The report says that citizens can be allowed to move small amounts of Zimbabwean dollars to be exchanged for the soon-to-be launched digital gold token. The plan will “leave no one and no place behind,” as the government hopes to have their citizens hedge against their own currency’s volatility, says Reserve Bank of Zimbabwe Governor John Mangudya.
As of writing, the Zimbabwean dollar trades at 1,001 ZWL against $1 USD – but is typically exchanged for 1,750 ZEL on the streets of the country’s capital Harare, according to reports from Bloomberg.
In March, Zimbabwe’s annual consumer price inflation reached a one-year low of 87.6%, down from 92% in February.
Governor Mangudya says that current exchange rate volatility has been caused by “expectations of increased foreign currency supply” on the market due to the tobacco season, and expects the exchange rate to stabilise after the country’s tobacco farmers have received their US dollar payments within the following weeks.
The ongoing economic crisis in Zimbabwe, according to reports from the Wall Street Journal, has prompted local businesses to print their “own money”, often in the form of handwritten scraps of paper, to act as a tender to pay for future purchases.
For over a decade, Zimbabwe has been fighting against currency volatility and inflation. In 2009, the country had adopted the US dollar as its currency after experiencing hyperinflation. In 2019, the Zimbabwean dollar was reintroduced in hopes to revive the country’s struggling economy. Last year, the Zimbabwean government shifted back to using the US dollar as its currency in an effort to curb price surges rampant in the country.
As a result of these economic crises, many African countries have been turning to crypto – with data from Chainalysis showing that the Middle East and North Africa is the fastest-growing region for crypto adoption. As crypto makes cross-border remittances easier for users, the region had $566 billion in crypto transactions between July 2021 and June 2022, an increase of 48% from the previous year.
Last August, the Reserve Bank of Zimbabwe announced that the country’s government is in the middle of studying the option of adopting a CBDC. It is uncertain whether this gold-backed digital currency is linked to the CBDC project in question, as CBDCs are typically associated with a state-issued currency.
