In an attempt to stabilize its local currency, the government of Zimbabwe plans to introduce a gold-backed digital currency as legal tender. According to local media outlet The Sunday Mail, the digital gold token will allow small amounts of Zimbabwean dollars to be exchanged for it, enabling more people to hedge against currency volatility. Zimbabwe’s annual consumer price inflation reached a one-year low in March, but the country’s currency trades at 1,001 ZWL against $1 and is typically exchanged for 1,750 ZWL on the streets of Harare, the capital. The introduction of the gold-backed digital currency is expected to help combat this issue.
Reserve Bank of Zimbabwe Governor John Mangudya has stated that the plan aims to “leave no one and no place behind.” He also said that the exchange rate in the parallel market is expected to stabilize after tobacco farmers receive their U.S. dollar payments in the coming weeks. The move towards a gold-backed digital currency comes after years of economic turmoil in Zimbabwe, which has led to many businesses printing their “own money” on handwritten scraps of paper.
Cryptocurrency adoption has been on the rise in Africa due to economic challenges, and the Middle East and North Africa have become the fastest-growing region for crypto adoption, according to Chainalysis. Between July 2021 and June 2022, there were over $566 billion in crypto transactions, up 48% from the previous year. Zimbabwe adopted the U.S. dollar as its currency in 2009 after experiencing hyperinflation, and in 2019, the Zimbabwean dollar was reintroduced to revive the struggling economy. However, last year, the government decided to use the U.S. dollar again to curb surging prices.
