The Reserve Bank of Zimbabwe is set to introduce a gold-backed digital currency to serve as legal tender in the country. The move is a government initiative to stabilize the local currency from continued depreciation against the U.S. dollar.
According to a report from local media outlet The Sunday Mail, the move will allow small amounts of Zimbabwean dollars to be exchanged for the digital gold token, enabling more Zimbabweans to hedge against currency volatility. Reserve Bank of Zimbabwe Governor John Mangudya said the plan intends to “leave no one and no place behind.”
Zimbabwe’s currency trades at 1,001 ZWL against $1 but is typically exchanged for 1,750 ZWL on the streets of Harare, the country’s capital, according to Bloomberg. The country’s annual consumer price inflation reached a one-year low in March at 87.6%, down from 92% in February.
According to Mangudya, the exchange rate in the parallel market is expected to stabilize after tobacco farmers receive their U.S. dollar payments in the coming weeks. He said the current exchange rate volatility has been caused by “expectations of increased foreign currency supply” on the market due to the tobacco season.
The monetary dysfunction in Zimbabwe and lack of changes have led to businesses printing their “own money,” often on handwritten scraps of paper, so that users can pay for future purchases, according to a Wall Street Journal report from March
Zimbabwe has been fighting against currency volatility and inflation for over a decade. In 2009, the country adopted the U.S. dollar as its currency after an episode of hyperinflation. In 2019, the Zimbabwean dollar was reintroduced in an effort to revive the country’s struggling economy. Last year, the government decided to use the U.S. dollar again in a bid to curb surging prices in the country.
Crypto adoption has grown in many African countries as a result of economic challenges. According to Chainalysis, the Middle East and North Africa is the fastest-growing region for crypto adoption thanks to cross-border remittances, with over $566 billion in crypto transactions between July 2021 and June 2022, up 48% from the previous year.