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- Zimbabwe’s central bank is launching a gold-backed digital currency to keep the local currency from depreciating further against the USD.
- The African country has been struggling with currency volatility and inflation for more than a decade now.
The Reserve Bank of Zimbabwe is planning to launch a gold-backed digital currency that will be a legal tender in the country. The measure is part of a government strategy to keep the local currency from depreciating further against the USD.
According to a local news report, the initiative will allow the country’s residents to trade tiny sums of Zimbabwean dollars for the digital gold token, allowing more Zimbabweans to hedge against currency instability.
The objective, according to Reserve Bank of Zimbabwe Governor John Mangudya, is to “leave no one and no place behind.”
Mangudya predicted that the parallel market currency rate will stabilize once tobacco growers receive their payments in USD in the following weeks.
He claimed that the current exchange rate volatility is the result of expectations of increased foreign currency supply on the market due to the tobacco season.
Economic crisis making way for crypto adoption
According to Bloomberg, Zimbabwe’s national currency trades at 1,001 ZWL per $1 but is routinely traded for 1,750 ZWL on the streets of the national capital, Harare. Annual consumer price inflation in the country fell to 87.6% in March, from 92% in February, a one-year low.
Zimbabwe has been struggling with currency volatility and inflation for more than a decade now. Following a period of hyperinflation, the country adopted the USD as its currency in 2009.
In 2019, the Zimbabwean dollar was revived to help the country’s faltering economy. But the government again decided to reintroduce the USD last year in an effort to cool the country’s soaring inflation.
As a result of economic crises, crypto usage has increased in several African countries, with Zimbabwe joining the league. According to a Chainalysis report, the Middle East and North Africa (MENA) is the fastest-growing region in the world for crypto adoption.
The reason behind this phenomenon is a large number of cross-border remittances, with over $566 billion in crypto transactions during July 2021- June 2022, up 48% from the previous year.
