The Central Bank of Zimbabwe to Issue Gold-Backed Digital Currency

The Central Bank of Zimbabwe is set to introduce a gold-backed digital currency that will serve as legal tender in the country. This move is a government initiative aimed at stabilizing the local currency from continuous depreciation against the US dollar.

According to a report by local media outlet The Sunday Mail, this move will allow for the exchange of small amounts of Zimbabwean dollars for a digital gold token, enabling residents of Zimbabwe to protect themselves from currency instability.

The Zimbabwean currency is trading at 1,001 ZWL to 1 USD, but is typically exchanged for 1,750 ZWL on the streets of Harare, the capital city, according to Bloomberg. The annual inflation rate for consumer prices in the country reached its lowest level in a year in March, at 87.6 percent, compared to 92 percent in February.

According to Governor John Mangudya, the exchange rate on the parallel market is expected to stabilize after tobacco farmers receive payments in US dollars in the coming weeks. He stated that the current volatility of the exchange rate is caused by expectations of increased foreign currency supply in the market due to the tobacco season.

Monetary dysfunction in Zimbabwe and a lack of change have led companies to print their ‘own money’, often handwritten on pieces of paper, so that users can pay for future purchases, according to a Wall Street Journal report from March.

Zimbabwe has been struggling with currency instability and inflation for over a decade. In 2009, the country adopted the US dollar as its national currency after a period of hyperinflation. In 2019, the Zimbabwean dollar was reintroduced in an effort to revive the country’s economy. Last year, the government decided to reintroduce the US dollar in an attempt to curb rising prices in the country.

Crypto adoption has increased in many African countries as a result of economic challenges. According to Chainalysis, the Middle East and North Africa are the fastest-growing regions for crypto adoption due to cross-border remittances, with over 566 billion dollars in crypto transactions between July 2021 and June 2022, which is 48 percent higher than the previous year.