The Central Bank of Zimbabwe has announced a new digital asset backed by gold.
On April 23, the Reserve Bank of Zimbabwe (RBZ) said that gold-backed digital assets will be used as legal tender in the African country.
The move is part of efforts to stabilize the country's economy and the currency's continued depreciation against the U.S. dollar.
The move will allow people holding small amounts of Zimbabwean dollars to exchange their money for digital tokens, local media reported. This will help them store value and hedge against currency fluctuations.
RBZ Governor Dr John Mangudya said the current exchange rate fluctuations were caused by "expectations of increased foreign currency supply".
This is due to farmers receiving dollar payments at the start of the tobacco season.
stay away from dollar
This is not the first time Zimbabwe has turned to gold to address currency fluctuations. Last year, gold coins were introduced to stabilize the local currency. It should officially trade for around Z1,000 to the US$1, but often changes hands on the street for up to Z1,750.
Zimbabwe abandoned its currency in 2009, replacing it mostly with the U.S. dollar. This comes after a period of extreme hyperinflation that rendered the local currency worthless. The Zimbabwean dollar was reintroduced in 2019 to revive the local economy, but volatility ensued again. Rather than adopting Bitcoin as a legal tender, it considered a CBDC (Central Bank Digital Currency).
No details were provided about the blockchain technology aspects of the new digital currency.
Gold is a relatively stable commodity compared to currencies. Gold prices have been rising this year as another looming U.S. banking crisis has led to a shift toward hedging assets.
Gold’s year-to-date performance
Since the beginning of the year, gold prices have increased by 8.25%. Additionally, they hit an all-time high of $2,040 an ounce on April 13, according to Gold Price. However, gold prices have since retreated and are currently trading around $1,980 an ounce.
By comparison, Bitcoin prices have soared this year, rising about 70% since Jan. 1.