The Reserve Bank of Zimbabwe plans to present a gold-backed digital currency as legal tender in a bid to stabilize its local currency.
The Reserve Bank of Zimbabwe is set to present a gold-backed digital currency to serve as legal tender in the country. The move is a government action to stabilize the local currency from continued depreciation against the U.S. dollar.
According to a report from local media outlet The Sunday Mail, the shift will permit small quantities of Zimbabwean dollars to be exchanged for the digital gold token, enabling further Zimbabweans to hedge against currency volatility. Reserve Bank of Zimbabwe Governor John Mangudya said the plan intends to “ leave no one and no place behind. ”
Zimbabwe’s currency trades at 1,001 ZWL against $1 but is generally exchanged for 1,750 ZWL on the streets of Harare, the country’s capital, according to Bloomberg. The country’s yearly consumer price inflation reached a one-year low in March at 87.6%, down from 92% in February.
According to Mangudya, the exchange grade in the parallel market is expected to improve after tobacco farmers take their U.S. dollar payments in the nearing weeks. He told the current exchange rate volatility had been caused by “ expectations of raised foreign currency supply ” on the market due to the tobacco season.
The financial dysfunction in Zimbabwe and absence of changes have led to firms printing their “ own money, ” frequently on handwritten scraps of paper, so that users can pay for future purchases, according to a Wall Street Journal report from March.
Zimbabwe has been clashing against currency volatility and inflation for over a decade. In 2009, the country adopted the U.S. dollar as its currency after an episode of hyperinflation. In 2019, the Zimbabwean dollar was presented in an effort to revive the country’s struggling economy. Last year, the government decided to use the U.S. dollar again in a bid to curb surging fees in the country.
Crypto adoption has grown in numerous African countries as a result of economic challenges. According to Chainalysis, the Middle East and North Africa is the rapidly-growing region for crypto adoption thanks to cross-border remittances, with over $566 billion in crypto deals between July 2021 and June 2022, up 48% from the previous year.
(ANA PAULA PEREIRA, Cointelegraph, 2023)