The African Country of Zimbabwe has launched its new gold-backed crypto to help the state with its economic challenges. Zimbabwe is experiencing high inflation, which is affecting its citizens. Zimbabweans are swapping their local currency in favor of the U.S. Dollar. This preference for the greenback is causing the foreign reserves to dwindle.
The Reserve Bank of Zimbabwe (RBZ) issues the new gold-backed digital currency. It is envisioned as a legal tender and a store of value alongside the Zimbabwean dollar and bond notes. Users can buy and sell using local fiat and other foreign currencies.
The Reserve Bank of Zimbabwe said that its decision to back the new digital currency with gold is a way to help keep its value stable. Gold is known to be a good store of value because it holds its price well during times of uncertainty. According to media reports, the country had 350 Kg of gold reserves valued at $22.8 million. The plan is to build it up to $100 million.
John Mangudya, RBZ governor, said that the digital currency will be introduced in two phases. The first is for investment purposes, and the second is for transactions. He said that the new digital currency will expand the value-preserving instruments available in the economy and enhance their divisibility and accessibility.
Zimbabwe Pioneer in Gold-backed Crypto
Other countries have started to introduce digital currencies, but Zimbabwe’s crypto is uniquely backed by gold. The country’s central bank is counting on gold’s ability to keep up with inflation.
The new gold-backed crypto was met with mixed reactions from economists and ordinary Zimbabweans. Some have welcomed it as a bold step to stabilize the local currency and offer an alternative to the US dollar, while others have expressed skepticism about its future.
Issues that Affect the Gold-backed Crypto
While gold is regarded as a fantastic store of value, the new digital asset may still face some issues.
• There is an absence of trust in the RBZ and its ability to manage
the digital currency and its gold reserves
• The country’s lack of infrastructure and awareness to support the
adoption and use of the digital currency
• There is a lack of regulatory clarity and oversight to prevent fraud
and abuse of the digital currency
• A potential backlash from international creditors and institutions
that may view the digital currency as a violation of existing agreements or
Will it Solve all Issues?
Zimbabwe is struggling with a lot of social and economic problems. High inflation, low productivity, and poverty are just some of the issues plaguing the country. The RBZ hopes that the introduction of the new gold-backed digital currency will help address some of these challenges. The new crypto is envisioned to be a stable and convenient medium of exchange. It will also serve as a store of value for the country’s citizens. However, plans and reality are two different things. We can only hope and wait to see if this will help Zimbabweans with their plight.
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