- The Zimbabwe dollar has been losing its value against the US dollar.
- The country has been grappling with inflation for more than a decade now.
- The Reserve Bank of Zimbabwe (RBZ) has announced plans to launch a gold-backed digital currency.
As countries experiment with central bank digital currencies (CBDCs) and others like El Salvador make Bitcoin their official legal tender, Zimbabwe is introducing a gold-backed digital currency.
At the end of last week, the Reserve Bank of Zimbabwe (RBZ) declared their intention to launch a gold-backed digital currency which will become legal tender in the country. This is part of the Zimbabwean government’s strategy to protect the local currency from further depreciation against the US dollar.
A Hedge Against Currency Instability
As reported by local media, the gold-backed digital currency will enable Zimbamweans to trade small amounts of Zimbabwean dollars for the digital gold token. This will offer Zimbabweans a way to protect themselves against their local currency’s volatility.
According to the governor of the Reserve Bank, John Mangudya, the purpose of the digital currency is to “leave no one and no place behind.” The governor added that they anticipate the “parallel market currency rate to stabilize once tobacco growers receive their payments in USD in the coming weeks.”
Mangudya argues that the present Zimbabwean dollar exchange rate instability is the result of expectations of increased foreign currency supply in the market due to the tobacco season. At present, the Zimbabwean dollar is trading at 1,001 ZWL per $1 and is regularly exchanged at 1,750 ZWL per $1 on the streets of the national capital, Harare.