Zimbabwe to Introduce Gold-Backed Digital Currency to Tackle Inflation

Reserve Bank of Zimbabwe Introduces Gold-Backed Digital Currency to Tackle Currency Volatility

To combat Zimbabwe's longstanding battle with inflation and currency volatility, the Reserve Bank of Zimbabwe has announced plans to launch a gold-backed digital currency as a legal tender. The move aims to stabilize the country's currency and give Zimbabweans a reliable hedge against volatility.The new digital gold token will allow Zimbabweans to hedge against currency volatility by exchanging small amounts of Zimbabwean dollars for the digital currency. Reserve Bank of Zimbabwe Governor John Mangudya stated that the plan intends to "leave no one and no place behind." This initiative is part of the government's efforts to revive the country's struggling economy.According to a report from local media outlet The Sunday Mail, Zimbabwe's currency currently trades at 1,001 ZWL against $1, but on the streets of Harare, it is typically exchanged for 1,750 ZWL. In March, the country's yearly inflation rate for consumer prices decreased to 87.6%, a one-year low, from the previous month's rate of 92%.The gold-backed digital currency will help to tackle the monetary dysfunction in Zimbabwe, where businesses have been printing their "own money" on handwritten scraps of paper to pay for future purchases. This move is a step towards stabilizing the local currency and combating inflation, which has been a long-standing problem in the country.Crypto adoption has been on the rise in many African countries due to economic challenges, with the Middle East and North Africa being the fastest-growing region for crypto adoption. According to Chainalysis, over $566 billion in crypto transactions occurred between July 2021 and June 2022, up 48% from the previous year, with cross-border remittances being the primary driver of this growth.Overall, the introduction of a gold-backed digital currency in Zimbabwe is a positive move towards stabilizing the country's currency and reviving its struggling economy. This move will enable Zimbabweans to have a more stable and secure form of currency to exchange and will help to combat the ongoing issue of currency volatility in the country.