Zimbabwe to Launch Gold-Backed Cryptocurrency

On April 23, the Reserve Bank of Zimbabwe (RBZ) said that the gold-backed digital asset will be used as legal tender in the African country.

The move is part of an effort to stabilize the country’s economy and the continuing decline in the local currency against the US dollar.

according to reports Per local media, the move will allow those with small amounts of Zimbabwean dollars to exchange their money for digital tokens. This will help them store value and hedge against currency fluctuations.

Reserve Bank of India Governor Dr John Mangudia said the current fluctuations in exchange rates were caused by “expectations of increased supply of foreign currency”.

This is due to the start of the tobacco season when farmers receive payments in US dollars.

Stay away from the dollar

This is not the first time Zimbabwe has turned to gold to address currency volatility issues. Last year, gold coins were introduced to stabilize the local currency. It should officially trade at around a Z1000 Z1 to the dollar, but can often change hands for as much as $1,750 on the streets.

Zimbabwe abandoned its currency in 2009, essentially replacing it with the US dollar. This came after a period of severe hyperinflation that rendered domestic money worthless. In 2019, it reintroduced the Zimbabwean dollar to revive the local economy, but volatility ensued again. It did not consider adopting Bitcoin as legal tender but did research CBDC (Central Bank Digital Currency).

No details were given about the technical aspects of the new digital currency’s blockchain.

Gold is a relatively stable commodity compared to currencies. Gold prices have soared this year as another impending banking crisis in the US prompted a trip to stock up on valuable assets.

Gold’s performance to date

Since the beginning of the year, gold prices have increased by 8.25%. Moreover, they reached an all-time high of $2040/oz on April 13, according to gold price. However, the yellow metal has since retreated and is currently around $1,980 an ounce.

By comparison, bitcoin prices have soared this year, up about 70% since January 1st.