Key takeaways:
- The Reserve Bank of Zimbabwe will begin issuing digital tokens backed by gold.
- The action is meant to stabilise the Zimbabwean currency and give individuals a way of hedging against inflation in the face of excessive inflation.
Zimbabwe has advanced in the digital currency market by announcing plans to launch a new digital currency. In order to decrease demand for the US dollar as the value of the local currency declines, the Reserve Bank of Zimbabwe (RBZ) plans to launch a digital currency backed by gold.
The Sunday Mail, a local media agency, reported that the move will make it possible to exchange tiny quantities of Zimbabwean dollars for the digital gold token, giving more Zimbabweans a way to protect themselves against currency swings. John Mangudya, governor of the Reserve Bank of Zimbabwe, said the goal of the strategy is to “leave no one and no place behind.”
Several countries have expressed interest in introducing their own digital currency. The decentralised nature of cryptocurrencies was a major problem that the countries simultaneously wished to resolve. Several countries have introduced digital currencies that are backed by assets, like gold, for this one purpose.
The latest state to support the effort was Texas, which on April 8th introduced legislation allowing the creation of a state-issued digital money backed by gold.
Zimbabwe has struggled to reduce interest rates since the country had a serious hyperinflationary crisis in 2008. Annual inflation has rarely fallen below 90% in the last year. In addition, the Zimbabwe dollar has plummeted versus major currencies.
It is vital to remember that Zimbabwe gave up its currency in 2009 and mostly replaced it with the US dollar after a period of hyperinflation made the local currency useless.
Residents of the nation would be able to trade Zimbabwe dollars for the digital gold as a way to protect themselves against unstable currency rates in the face of inflationary conditions. The issuing authority will continue to have control of the gold itself.
Users that hold even tiny amounts of Zimbabwean dollars will be able to exchange their cash for virtual tokens thanks to the digital currency. This will enable them to protect themselves from the current currency instability and store value.
According to a Wall Street Journal article from March, companies are creating their “own money,” frequently on handwritten scraps of paper, so that customers can pay for future purchases as a result of Zimbabwe’s dysfunctional currency and shortage of change.
The Reserve Bank of Zimbabwe (RBZ) underlined its support for a central bank digital currency (CBDC) over cryptocurrencies in February of last year. According to reports, the authorities are actively investigating the feasibility of establishing a Zimbabwean CBDC, including specific design difficulties.
