The Reserve Bank of Zimbabwe recently announced the issue of gold-backed digital currency as a legal tender. The government initiative is aimed to stabilize local currency from its depreciation against the US dollar. This move will help Zimbabwe nationals hedge against currency volatility.
According to a report published by local media, the government is planning to allow small amounts of Zimbabwe dollars to be exchanged for the digital gold token. It is important to note here that Zimbabwe is experiencing an inflationary disorder. According to government reports, The country’s annual consumer price inflation has reached 87.6%.
According to the Central Bank governor, John Mangudya, “the plan intends to leave no one and no place behind.” The authority mentioned that current exchange rate volatility was because of “expectations of increased foreign currency supply” on the market due to the tobacco season.
He further added that there are potential chances of stabilization of the exchange rate in the parallel market post-tobacco farmers receiving their payments in Dollars in the coming weeks.
Zimbabwe has been fighting against currency volatility and inflation for over a decade. In 2009, the country adopted the US dollar as its currency after an episode of hyperinflation. In 2019, the Zimbabwe dollar was reintroduced to revive the country’s struggling economy. Last year, the government decided to use the US dollar again in a bid to curb surging prices in the country.
As per the report published by the Wall Street Journal, Zimbabwe currently is suffering from monetary dysfunction making it difficult to perform small changes. For example, Businesses in the country have started printing their own money on handwritten scraps of paper.
It is important to note here that various African countries in the recent past are either legalizing crypto based ecosystems or planning to regulate crypto through legislation. For example, Ghana calls cryptocurrencies digital assets and is working on the formulation of rules for regulation. Nigeria is planning to pass legislation for crypto rules in the upcoming finance bill. On the other hand, South Africa Reserve Bank issued guidance for implicitly legalizing cryptocurrencies.
The Major problem in African nations with the cryptocurrencies and other digital assets is a patchwork of vague regulations and implicit as well as explicit bans, these issues have further complicated the system. Thus, comprehensive legislation and coded regulation can provide ground for the crypto ecosystem to establish.
