The Reserve Bank of Zimbabwe (RBZ) announced plans to issue a gold-backed digital currency. The initiative aims to stabilize the local fiat currency and increase user confidence.
Representatives of the Reserve Bank of Zimbabwe intend to introduce a gold-backed digital currency as legal tender to stabilize the Zimbabwean dollar (ZWL). It was reported by The Sunday Mail citing John Mangudya, Governor of the RBZ. No technical details of the project have yet been released.
The digital assets will be backed by gold held in the RBZ account and approved as official means of payment. The gold-backed token will allow locals to protect their fiat savings from volatility. The U.S. dollar (USD) currently performs this function. The current destabilization of the ZWL exchange rate is caused by lower-than-expected USD inflows into the local market due to the start of the tobacco season, which provoked pressure on the exchange rate of the national currency.
The financial regulator is also planning to increase the issuance of Mosi-oa-Tunya, physical gold coins issued in 2022 to stabilize the value of ZWL in the parallel market. The official exchange rate of ZWL against USD is 1,001 to 1, but the value of 1 USD in street exchangers reaches 1,750 ZWL, as reported by Bloomberg.
Economic problems, inflation at 87.6%, and the inability of financial authorities to influence the situation resulted in a lack of confidence in the national currency among locals. As a result, goods and services are mostly paid in USD, but the volume of USD in the local market isn’t enough for full-fledged economic activity. The introduction of a gold-backed digital currency is designed to change the situation.
In 2022, investments in blockchain projects in Africa grew by 429%. The popularity of cryptocurrencies among African residents is caused primarily by economic problems and the high volatility of national currencies. Furthermore, digital assets greatly simplify and speed up cross-border transfers to African countries while reducing commission costs.
