Defying an International Monetary Fund (IMF) warning, the Reserve Bank of Zimbabwe has managed to sell 14 billion Zimbabwean dollars (approximately $39 million) worth of gold-backed digital tokens. For the purchase of the cryptocurrency backed by gold, the central bank reported on May 12 of receiving 135 applications totalling 14.07 billion Zimbabwean dollars.
From May 8 to May 12, buyers may acquire the recently launched cryptocurrency tokens, which are backed by 139.57 kilogrammes of gold. With a 180-day minimum vesting time, the minimum pricing for both private people and businesses were set at $10 and $5,000, respectively. These tokens can be kept on e-gold cards or in e-gold wallets.
The goal of this action by the Reserve Bank of Zimbabwe is to stabilise the economy of the nation and stop the continued depreciation of the local currency in relation to the US dollar. While actual exchange rates are far higher, there are reports that the official rate for the Zimbabwean currency is 362 ZWD to 1 USD.
The central bank has announced a second round of digital token sales in reaction to the original sale’s success. The Reserve Bank of Zimbabwe’s Governor, Dr. John Mangudya, stressed on local media that the goal of the release of gold-backed digital tokens is to increase the number of value-preserving instruments available in the economy and to improve the public’s access to and use of investment products by making them more divisible. For settlement by May 18, applications must be filed this week.
Meanwhile, recently the IMF expressed their discontent against Zimbabwe’s proposal for a gold-backed currency, as reported earlier by Koinreport, advising the country to put more effort into liberalising its foreign exchange market. A spokesperson from the IMF alerted that, “A careful assessment should be conducted to ensure the benefits from this measure outweigh the costs and potential risks including, for instance, macroeconomic and financial stability risks, legal and operational risks, governance risks, cost of forgone FX reserves.” Tendai Biti, the former finance minister of Zimbabwe, criticised the new digital currency with a gold backing as well, arguing that the Zimbabwean dollar should be floated by the central bank to provide market stability.
Zimbabwe has suffered from inflation and currency fluctuations for more than 10 years. In 2009, the country adopted the US dollar as its official currency after a period of hyperinflation during which the native currency was worthless. In an effort to boost the local economy, the Zimbabwean dollar was reinstated in 2019, but instability has persisted ever since. It is to see whether the latest bold initiative from the government will have any major impact in stabilising the nation’s economy.