Zimbabwe is currently considering the introduction of a gold-backed digital asset to help maintain economic stability, due to the unstable state of the dollar. The country plans to hedge against the volatile Zimbabwean dollar, which is linked to the US dollar, by offering this digital token to investors.
Additionally, major financial institutions such as Morgan Stanley and JP Morgan Asset Management have predicted that the strength of the dollar will soon come to an end, as the US Federal Reserve imposes further controls.
Zimbabwe’s Reserve Bank is reportedly planning to introduce a gold-backed stablecoin as a legal tender to combat inflation in the country. Unlike standalone cryptocurrencies such as Bitcoin and Ether, stablecoins are tied to a reserve asset like gold or national currency, preventing significant drops amidst crypto volatility.
This makes stablecoins a secure investment option for those looking to participate in the digital assets industry. The proposed digital token is expected to fall under the stablecoin category.
Upon the launch of the gold-backed digital token, the Zimbabwean government has announced plans to permit individuals to exchange small denominations of the Zimbabwean dollar for the digital gold token. This move is intended to protect investments against market volatility and fluctuations.
According to a CoinTelegraph report, Zimbabwe’s annual consumer price inflation rate decreased to a one-year low in March, reaching 87.6%. This is a decline from the 92% rate recorded in February. Despite the decrease, the inflation rate is still high, and the launch of a gold-backed digital token is expected to provide a more stable investment option for individuals in the country.
The Zimbabwean dollar was reintroduced into the country’s economy in 2019 as an effort to strengthen its financial position. From 2009 to 2019, Zimbabwe used the US dollar as its national currency, but this move did not have the desired effect on the country’s economy. The reintroduction of the Zimbabwean dollar was an attempt to regain control of the country’s monetary policy and stimulate economic growth.
Zimbabwe ‘s decision to explore the use of a stablecoin as an investment tool is the latest in a series of pro-crypto moves made by African countries. In Nigeria, Kenya, Tanzania, and South Africa, the collective cryptocurrency market grew by 1,200% between 2020 and 2021, reaching a market valuation of $105.6 billion. This reflects the increasing interest and adoption of cryptocurrencies in African countries as an alternative to traditional financial systems.
According to the IMF, Kenya, Nigeria, and South Africa have the highest number of cryptocurrency users in Africa. Some African countries are also making strides toward crypto adoption.
Nigeria has also launched its own central bank digital currency (CBDC) called e-Naira. The e-Naira is intended as an alternative to cash notes and is expected to provide a more efficient and secure means of conducting transactions.
