Global Courant 2023-04-24 21:31:00
Main image: REGTECH AFRICA
The Reserve Bank of Zimbabwe has announced plans to launch a gold-backed digital currency to help stabilize the country’s local currency. According to The Sunday Mail, the move is part of the government’s efforts to reduce currency volatility, which has been a major problem 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.
Reserve Bank of Zimbabwe Governor John Mangudya explained that the plan aims to “leave no one and no place behind”. The move is expected to benefit the local economy and reduce inflation, which hit a one-year low of 87.6% in March this year, up from 92% in February. Mangudya expects the parallel market exchange rate to stabilize once tobacco growers receive their payments in US dollars in the coming weeks. He explained that the current volatility in exchange rates is due to “expectations of an increased supply of foreign currency” in the market due to the tobacco season.
Zimbabwe’s introduction of a gold-backed digital currency comes at a time when the country has struggled with currency volatility and inflation for more than a decade. After a period of hyperinflation, Zimbabwe adopted the US dollar as its currency in 2009. In an effort to revive the country’s struggling economy, the Zimbabwean dollar was reintroduced in 2019. Last year, the government decided to reintroduce the US dollar in an effort to cool the country’s rising prices.
According to a March Wall Street Journal report, the lack of change in Zimbabwe’s monetary system has led companies to print their “own money,” often on handwritten slips of paper, so 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 degree of stability to the country’s currency.
Due to 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, a 48% increase over the previous year. Cryptocurrencies offer a way to bypass traditional banking systems and transfer money across borders, making them an attractive option for many in emerging economies.
Finally, the introduction of a gold-backed digital currency in Zimbabwe is expected to help stabilize 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 efforts to slow down the local currency’s depreciation against the US dollar. The use of cryptocurrencies is on the rise in many African countries and the introduction of a gold-backed digital currency in Zimbabwe is expected to bring some economic stability.
