The Zimbabwean apex bank plans to launch a gold-backed digital currency which will become the country’s legal tender. The government decision was triggered by the uncertainty battling the value of the US dollar.
The ongoing macroeconomic pressure has recently impacted the US dollar’s value to depreciate. The Zimbabwean latest development in digital currency aims to improve the local currency’s stability.
Additionally, the new digital token in Zimbabwe will have features similar to electronic money but will be supported by the gold reserves issued by the reserve bank.
Proposed Issuance of Gold-Backed Digital Currency
An announcement by “The Sunday Mail” outlined the procedures and conditions for issuing the gold-backed currency. The report revealed that Zimbabweans could convert their digital currency to local fiat due to the volatile crypto markets.
Responding to the post, the governor of the Zimbabwean Central Bank, John Mandudya, admitted that the new currency aims at upholding financial inclusivity. Mandudya announced that the apex bank plans to ensure no one is excluded in adopting the digital fiat.
In his remarks, Mandudya stated that Zimbabweans holding small amounts of Zim dollars could purchase the token. The upcoming launching of the token in Zimbabwe mirrors the South African move to adopt a digital currency to address the high liquidity and instability of the local rands.
As of this writing, the local Zimbabwean fiat trades Z$1,000.4 at $1. Though in the Zimbabwean streets, the one dollar is trading at Z$1,750.
Scope of Crypto Adoption in Zimbabwe
Governor Mandudya remains optimistic that the local unit will soon stabilize after the payments for the Tobacco are fully settled in US currency. He lamented that the exchange rate fluctuation was triggered by over-reliance on foreign currency in the market.
During the tobacco harvesting period, the regulators anticipate that the supply of the US dollar will increase. In March, the regulators observed that the dysfunctionality of the Zimbabwe monetary policy prompted businesses to create their paper currency.
They noted that business people in Harare and other regions issued paper money to allow the customer to make purchases in future. Since then, the regulators have been pursuing strategies to address the volatility of the local currency.
Also, the hyperinflation concerns battling the region prompted the regulators to explore practical methods to control inflation. Over the past, Zimbabwe has experienced an ailing economy.
The attempt to bolster economic development in the region inspired the regulators to adopt the US dollar in 2009. Afterwards, the regulators continued to develop their local currency to support the economy’s recovery.
In 2019, the Reserve Bank, under Governor Madudya, launched the Zimbabwe dollar. After the long struggle to restore the Zimbabwean economy, the regulators shifted to using the US dollar in 2022 to address the spiking prices of common commodities.
Analyzing African Crypto Adoption
Despite recording poor economic performance, the African continent has experienced a growing number of crypto proponents. A recent study by Chainalysis revealed that the Middle East and North Africa (MENA) region has a high number of crypto adoption.
Reportedly, cross-border payment acceptance has triggered the number of crypto transactions to reach $566 billion from mid-2021 to last June. The previous years’ crypto transactions sparked a sharp increase of 48%.
Besides the crypto adoption, central banks in the African region have prioritized developing digital currency. The Zimbabwe apex bank announced plans to start the development of the central bank digital currency (CBDC) in August 2023.
Correspondingly, Nigeria is still developing the country’s eNaira to cope with the emerging technologies.