Zimbabwe set to introduce gold-backed digital currency to stabilize Zimbabwean dollar: report

Zimbabwe, in a bid to keep its economy stable in the face of fluctuating dollar, is considering launching a gold-backed digital asset. This digital token will be offered to investors to hedge against the volatility of the Zimbabwe dollar currency, which has fluctuated against the US dollar. Meanwhile, Morgan Stanley and JP Morgan Asset Management are among the global financial firms that have predicted the end of dollar strength as the US Federal Reserve exercises additional controls.

The Reserve Bank of Zimbabwe is reportedly seeking to launch the so-called gold-backed digital token, as legal tender in the country to fight inflation. The new token is expected to be categorized as “stablecoin”. Stablecoins, unlike other independent cryptocurrencies like Bitcoin and Ether, are pegged to a reserve asset like gold or national currency. This prevents stablecoins from suffering significant declines amid crypto volatility, making them a safe investment option for those looking to engage in the digital asset industry.

Once the token is launched, the government of Zimbabwe would allow small denominations of the Zimbabwean dollar to be exchanged for the digital gold token to protect their investments from market fluctuations.

According to a CoinTelegraph report, the country’s annual consumer price inflation fell to its lowest level in a year in March at 87.6%, from 92% in February.

The Zimbabwean dollar was only reintroduced into the economy in 2019 to bolster its financial position. Between 2009 and 2019, the country adopted the US dollar as its national currency. However, this decision did not give the country’s economy the desired boost.

Zimbabwe’s move to give a stablecoin a chance to establish itself as an investment tool is the latest in a string of pro-crypto moves by African countries. The crypto market in Nigeria, Kenya, Tanzania, and South Africa collectively grew by 1,200%, reaching a market valuation of $105.6 billion (about Rs. 775 crore) between 2020 and 2021.

According to the IMF, Kenya, Nigeria, and South Africa have the highest number of crypto users in the region.

The Central African Republic, for example, followed El Salvador, legalizing Bitcoin earlier this year.

Nigeria has launched its own central bank digital currency (CBDC) called e-Naira for its nationals to use as an alternative to cash notes.

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