Country Unveils Plan To Create Digital Currency Backed By Gold

On Friday, Zimbabwe’s central bank announced plans to debut a digital currency using “tokens.” 

These “tokens” will have value since they are backed by bank-held gold and can be traded between people and businesses.

This is being done to help stabilize the Zimbabwe dollar, which has been in freefall due to the country’s ongoing economic crisis.

The people of Zimbabwe have a very low degree of trust in their money due to the hyperinflation that occurred in 2008. The International Monetary Fund estimates that Zimbabwe’s inflation rate peaked at almost 5 billion %.

The hyperinflation led to issuing a note for 100 trillion Zimbabwe dollars at one point. The government was forced to accept the U.S. dollar as legal tender temporarily. In 2019, the government of Zimbabwe reinstated a national currency and made it illegal to use foreign currencies in domestic transactions. But because so few people cared, the black market grew, and the value of the local currency plummeted. The restriction on using American dollars was abolished after the administration caved in.

As a result of widespread distrust, many private enterprises and even some public agencies refuse to recognize the Zimbabwe dollar.

On the official market, one thousand Zimbabwe dollars will buy you just about a dollar in the United States. However, in an unlicensed but thriving street market, where greenbacks are widely available, the price of one U.S. dollar is almost equal to two U.S. dollars.

According to John Mangudya, Governor of the Reserve Bank of Zimbabwe, the new tokens will enter circulation on May 8. 

Mangudya claims that tokens can be used for person-to-person and person-to-business transactions and settlements, meaning that anyone can buy them to save money or conduct commercial deals with others.

Many other countries, including China, are also beginning cryptocurrency pilot programs. The United Kingdom is asking for public feedback. The United States and the European Union may take parallel steps.

In Jamaica, the Bahamas, and Nigeria, national digital currencies supported by their central banks have already been introduced. 

Mangudya said that the tokens would be available at banks and that clients could use “e-gold wallets or e-gold cards” issued by the financial institutions to make purchases.

Zimbabwe is located in southern Africa.