The Reserve Bank of Zimbabwe is planning to introduce a gold-backed digital currency as a means of stabilizing the country’s local currency, which has been experiencing continued depreciation against the U.S. dollar. This government initiative aims to address currency volatility and provide Zimbabweans with a means to hedge against it. The digital gold token will allow small amounts of Zimbabwean dollars to be exchanged, ensuring wider accessibility for citizens. Reserve Bank of Zimbabwe Governor, John Mangudya, emphasized the intention to include everyone in this endeavor.
Currently, the official exchange rate stands at 1,001 ZWL against $1, but on the streets of Harare, the capital, it typically trades at 1,750 ZWL per U.S. dollar, according to Bloomberg. The country’s annual consumer price inflation reached a one-year low of 87.6% in March, down from 92% in February.
Governor Mangudya anticipates that the exchange rate volatility in the parallel market will stabilize once tobacco farmers receive their U.S. dollar payments in the coming weeks. He attributes the current volatility to the “expectations of increased foreign currency supply” resulting from the tobacco season.
To combat monetary dysfunction and a lack of change, businesses in Zimbabwe have resorted to printing their own makeshift currency on handwritten scraps of paper, as reported by The Wall Street Journal in March.
Zimbabwe has grappled with currency volatility and inflation for over a decade. In 2009, the country adopted the U.S. dollar as its official currency after experiencing hyperinflation. In 2019, the Zimbabwean dollar was reintroduced in an attempt to revive the struggling economy. Last year, the government reverted to using the U.S. dollar once again to tackle soaring prices.
Amid economic challenges, crypto adoption has seen significant growth in various African nations. According to Chainalysis, the Middle East and North Africa region has experienced the fastest-growing crypto adoption, driven by cross-border remittances. The region witnessed over $566 billion in crypto transactions between July 2021 and June 2022, marking a 48% increase from the previous year.