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The Reserve Bank of Zimbabwe (RBZ) has announced its plans to introduce a gold-backed digital currency as legal tender in an effort to stabilize the local currency, the Zim dollar, according to a report by the Sunday Mail. This move comes as the Zim dollar faces extreme volatility, with its value against the US dollar dropping significantly over the past year.
The proposed digital tokens will be a form of electronic money backed by the country’s gold reserves, which will be held by the central bank. RBZ aims to offer a way for people holding Zim dollars to exchange their money for the gold-backed token, providing a hedge against the local currency’s volatility.
Currently, the Zim dollar’s value fluctuates significantly, with 1 US dollar being worth around 1,000 Zim dollars, compared to 150 Zim dollars just a year ago. Zimbabwe operates a dual-currency system, utilizing both the Zim dollar and the US dollar.
In August, RBZ announced its intention to create a central bank digital currency (CBDC). This move follows a trend among African countries exploring the potential of CBDCs. Nigeria, for example, launched its eNaira digital currency in October 2021.
The introduction of a gold-backed digital currency in Zimbabwe could potentially provide a more stable alternative to the Zim dollar and help restore confidence in the country’s financial system. However, the success of this initiative will depend on factors such as the central bank’s ability to maintain adequate gold reserves, public trust in the digital currency, and the government’s commitment to addressing broader economic challenges.