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Zimbabwe launches a gold backed cryptocurrency to diminish the Dollar

WHY THIS MATTERS IN BRIEF

There are many countries that are trying to reduce their reliance on the US Dollar, and they’re using all kinds of means to achieve it.

 

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As we continue to see the power of the dollar, the world’s global reserve currency, erode as countries such as China, Iran, Russia, and others do their best to usurp it, Zimbabwe has announced it will soon introduce a gold-backed digital currency – a kind of stablecoin – meant to stabilize the local currency or unit from its continued depreciation against the dollar, state-run Sunday Mail reported, citing central bank governor John Mangudya.

 

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This will allow those holding small amounts of Zimbabwe dollars to exchange their money for digital tokens to store value and hedge against currency volatility, the report said.

The tokens will also help ensure that those with low amounts of local currency can buy the gold units “so that we leave no one and no place behind,” Mangudya told the Sunday Mail.

 

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Last year, the southern African country also introduced gold coins in bid to mop up excess liquidity and stabilize their currency, and while officially the local currency trades at Z$1,000.4 against the dollar it readily changes hands at Z$1,750 on the streets of the capital.

Mangudya said current exchange rate volatility was due to expectations of increased foreign currency supply in the market when the tobacco auction season started in March.

 

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To date, since the start of the auction season Zimbabwe has exported 54.9 kilograms of tobacco valued at $307 million, and during the same period last year, it had shipped 57 million kilograms valued at $295.5 million.

Zimbabwe abandoned its currency in 2009, replacing it mainly with the US dollar after an episode of hyperinflation rendered the local money literally worthless. The Zimbabwe dollar was then reintroduced in 2019 in a bid to revive the stagnating economy, but the government in June decided to make the greenback legal tender again to try and tame rampant price increases – a move that they are now trying to walk back.

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