Zimbabwe Set to Introduce Gold-Backed Digital Currency to Stabilise Zimbabwean Dollar: Report

The digital token will be offered to investors to hedge against the volatility of the Zimbabwean dollar currency.

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

Zimbabwe’s gold-backed token is likely to be classified as a stablecoin

The reserve bank of Zimbabwe is reportedly looking to launch the purported digital token backed by gold, as legal tender in the country to fight against inflation. The new token is expected to be categorised as a ‘stablecoin’. Stablecoins, unlike other independent cryptocurrencies like Bitcoin and Ether, are pegged against a reserve asset like gold or the national currency. This prevents the stablecoins from undergoing major drops amid crypto volatility, making them a safe investment option for those looking to engage with the digital assets sector.

Once the token is launched, the government of Zimbabwe will reportedly allow the exchange small denominations of the Zimbabwean dollar for the digital gold token to safeguard their investments against market fluctuations.

Inflation is out of control

As per a CoinTelegraph report, the country’s annual consumer price inflation dipped to a one-year low in March at 87.6 percent, down from 92 percent in February.

The Zimbabwean dollar, was re-introduced in the economy only in 2019 to strengthen its financial position. Between 2009 and 2019, the country had adopted the US dollar as its national currency. However, the move did not give the country’s economy the desired push.

Zimbabwe’s move to give a stablecoin a chance at establishing itself as an investment tool, is the latest in a series of pro-crypto decisions taken by countries in Africa. The crypto market in Nigeria, Kenya, Tanzania, and South Africa collectively grew by 1,200 percent, reaching a market valuation of $105.6 billion (roughly Rs. 775 crores) between 2020-2021.

Crypto has gradually gained popularity

As per 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, legalising 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.