The Reserve Bank of Zimbabwe will launch a gold-backed digital currency as the country's legal tender. The move is a government initiative aimed at stabilizing the local currency against the continued depreciation of the greenback.
The move will allow small amounts of Zimbabwean dollars to be exchanged for digital gold tokens, allowing more Zimbabweans to hedge against currency fluctuations, according to local outlet The Mail on Sunday. Reserve Bank of Zimbabwe governor John Mangudya said the plan a imed to "leave no one and no place behind". Zimbabwe's currency trades at 1,001 ZWL to the US dollar, but is usually exchanged for 1,750 ZWL on the streets of the country's capital, Harare, according to Bloomberg. The country's annual consumer price inflation hit a one-year low of 87.6% in March, down from 92% in February.
According to Mangudya, the exchange rate in the parallel market is expected to stabilize after farmers receive payments in US dollars in the coming weeks. He said the current exchange rate volatility was caused by "expectations of increased foreign exchange supply" in the market due to the peak tobacco season. Zimbabwe's currency dysfunction and lack of change has led businesses to print "their own money," often on handwritten slips of paper, so users can pay for future purchases, the Wall Street Journal reported in March.
Zimbabwe has struggled with currency volatility and inflation for more than a decade. In 2009, after experiencing hyperinflation, the country adopted the US dollar as its currency. In 2019, the Zimbabwean dollar was reinstated to revive the country's struggling e economy. Last year, the The government decided to use the US dollar again to curb soaring domestic prices.
Cryptocurrency adoption has increased in many African countries due to economic challenges. According to Chainalysis, the Middle East and North Africa is the fastest-growing region for cryptocurrency adoption due to cross-border remittances, with more than $566 billion in c cryptocurrency transactions between July 2021 and June 2022, an increase of 48% over the previous year .
