The Reserve Bank of Zimbabwe, despite a warning from the IMF, issued digital tokens backed by gold for 14 billion Zimbabwean dollars, or around $39 million.
On May 12, the Zimbabwean central bank revealed that it had received 135 requests to purchase the cryptocurrency backed by gold, totaling 14.07 billion Zimbabwean dollars.
The official rate for the Zimbabwean dollar, according to XE.com, is 362 ZWD to USD, but the market rate is far higher, making the stash nominally worth $38.9 million.
The initial 139.57 kilograms of gold will be used as collateral for the cryptocurrency tokens’ auction, which will take place from May 8 to May 12.
A token might be purchased for a minimum of $10 from an individual or $5,000 from a company or other organization. The tokens can be stored on e-gold cards or in e-gold wallets and have a 180-day minimum vesting period.
Reports state that the measure’s objective is to stabilize the country’s economy and halt the steady depreciation of the local currency against the US dollar.
Applications should be completed and submitted this week by May 18 per the bank’s requirement. There will be a new sale of digital tokens. RBZ Governor Dr. John Mangudya is reported to have said: “The issuance of the gold-backed digital tokens is intended to expand the value-preserving instruments available in the economy, enhance the divisibility of the investment instruments, and widen access to and use of these instruments by the general public.”
The decision was taken in response to the International Monetary Fund’s warning against the African country’s proposal for the gold-backed currency, which claimed that it should instead liberalize its foreign exchange market, according to a May 9 Bloomberg story.
According to an IMF representative who spoke with Bloomberg, “There should be a thorough analysis to make sure the benefits from this measure outweigh the costs and potential risks, including, for example, macroeconomic and financial stability risks, legal and operational risks, governance risks, and the cost of forgone FX reserves.”
Experts anticipate a favorable effect on the country’s economy, and the worldwide crypto community has generally praised Zimbabwe’s decision. If this project is successful, other nations with significant gold deposits may follow Zimbabwe’s example, further solidifying the position of cryptocurrencies in global banking.
This project’s precise effect is still unknown. Yet as Zimbabwe enters the era of crypto-gold, an abundance of chances for economic rebirth present themselves. This audacious action might create a new standard for the union of physical assets and virtual currencies, while the rest of the world closely monitors it.
For almost 10 years, Zimbabwe has struggled with inflation and currency fluctuation. Following a period of hyperinflation that rendered the native currency useless, the nation adopted the USD as its official currency in 2009.
The Zimbabwe dollar revived in 2019 to strengthen the local economy, but unrest quickly resurfaced.