•  The Central Bank of Zimbabwe has proposed issuing a virtual currency supported by gold as a valid currency.
• This plan is part of an endeavour by the government to prevent a further decline of the country’s currency relative to the dollar.

Recently, many countries have sought ways to reduce their dollar dependence, and Zimbabwe has not been left behind. The Central Bank of Zimbabwe has proposed issuing a virtual currency supported by gold as a valid currency.  According to The Sunday Mail, which had a candid interview with the Governor of the Central Bank of Zimbabwe, Dr John Mangudya, the plan allows Zimbabweans to protect themselves against currency instability by exchanging tiny quantities of their local currency for the virtual gold coin.

This plan is part of an endeavour by the government to prevent a further decline of the country’s currency relative to the dollar. According to Zibambwen Official, this will help strengthen its domestic currency and prevent further decline of the country’s currency relative to the dollar. 

Zimbabwe launches Gold coin project to tackle inflation

Last year, Zimbabwe launched gold coins to absorb excess cash and support the domestic currency. The country has had a troubling inflation history since a severe hyperinflation problem struck the nation in 2008. Thus making it difficult for them to lower the rates. The official exchange rate between the Zimbabwean currency and the US dollar is 322 ZWL, at the time of launching the gold coin about 8 months ago, one coin cost $1824. 

According to Dr Mangudya, the recent currency volatility results from market participants’ anticipations of a rise in the availability of foreign currencies once the tobacco bidding season began in March.

Since the bidding season began, Zimbabwe has shipped over 54.9 kg of tobacco for 307 million dollars. Additionally, it had exported 57M Kg totalling $295.5M within the same period the previous year.

Due to their economic difficulties, numerous African nations have increased their acceptance of cryptocurrencies. Consequently, international money transfers, the Middle East, and northern Africa regions are the areas with the most rapidly growing usage of cryptocurrencies, as reported by Chainalysis.

Currencies that are backed by cryptocurrency

It goes without saying that there have been numerous prior efforts to digitise physical gold holdings.

The Central Bank of Zimbabwe can draw ideas from the likes of Perth Mint Gold Token (PGMT), Meld Gold by Algorand (MCAU), DigixGlobal (DGX), and many more. These tokens, which prominent individuals in the cryptocurrency industry created, give investors another method to buy gold. And they can do this without needing to hold them individually.

Blockchain technology vendors frequently work with experts in valuable metals trade and storage when the currency is supported by gold.

One such partnership is between Aurus and the valuable metals factory SEMPSA JP. The firm provides gold vendors with tokens backed by gold and silver, thanks to the partnership. Tokenised gold makes it simple for vendors to buy lesser weights while also giving professionals the burden of storing. Gold-backed cryptocurrency can lessen the entrance requirements to the investing category since no real metal needs to be handled when virtual assets are exchanged.