The government of Zimbabwe is set to launch a new cryptocurrency backed by gold reserves in an effort to stimulate the country’s struggling economy. The new digital currency, called the Zimbabwe Dollar Gold (ZDGC), will be backed by the country’s abundant gold reserves and is expected to provide a secure and stable alternative to the volatile Zimbabwe dollar. The move signals a shift towards crypto adoption by governments, as more countries are exploring the potential of blockchain-based assets. The launch of the ZDGC could also lead to increased cryptocurrency and blockchain investment in Zimbabwe, further bolstering the country’s economic growth.
Zimbabwe to Introduce Gold-Backed Digital Currency
Zimbabwe’s Reserve Bank has announced that it will introduce a gold-backed digital currency as legal tender in the African nation as part of its efforts to stabilize the country’s economy and local currency against the US dollar. The move is expected to alleviate the current exchange rate volatility caused by expectations of increased foreign currency supply. By exchanging their small amounts of Zimbabwean dollars for digital tokens, Zimbabweans can now store value and hedge against currency volatility.
Gold, being a relatively stable commodity, is an ideal choice for the central bank as the country is planning to distance itself from the US dollar. This is not the first time Zimbabwe has turned to gold to address currency volatility issues. Last year, gold coins were introduced to stabilize the local currency, which has often changed hands for as much as $Z1,750 on the streets despite an official trading rate of around $Z1,000 to the dollar.
Zimbabwe, once known for its hyperinflation issues rendering its currency worthless, abandoned its currency in 2009, replacing it with mainly the US dollar. In 2019, Zimbabwe reintroduced the Zimbabwe dollar in a bid to revive the local economy, but the currency’s volatility ensued again. While the country has mulled a central bank digital currency, it has not considered adopting Bitcoin as a legal tender.
Technical details on the blockchain of the new digital currency were not provided, but the move to introduce a gold-backed digital currency is expected to boost confidence in the Zimbabwean economy. Since the beginning of the year, gold prices have increased by 8.25% and hit an all-time high of $2,040 USD/oz on April 13. On the other hand, Bitcoin prices have surged and gained around 70% since January 1.
In conclusion, Zimbabwe’s move to launch a gold-backed digital currency is an effort to stabilize the local currency’s depreciation against the US dollar. Gold’s relative stability makes it an ideal choice for the central bank, and it is expected to boost local confidence in the Zimbabwean economy. Therefore, the launch of the new digital currency may help many Zimbabweans store value and hedge against currency volatility.