Zimbabwe To Create New Gold-Backed Digital Currency

April 24, 2023 9:56 pm Comments

The country of Zimbabwe just announced that it will be launching a new digital currency that will be backed by gold in order to create financial stability for the country.

The nation has suffered from massive amounts of inflation in the past and there are hopes that this will enable citizens to finally protect their assets from losing value.

CBDCs are nothing new at this point, but there have been few that have been proposed that would be backed by gold specifically.

So far, it seems that the launch of this new currency has the support of the country’s central bank as Central Bank Governor John Mangudya stated that this would help prevent it from depreciating against the US dollar.

It is still unknown what the exact timeline will be for the launch of this new digital currency, but it is clear that many central banks around the world are exploring this option.

Watcher.guru reports:

The launch of digital currency is envisioned to stabilize the local unit. Additionally, it is also aimed at preventing it from depreciating against the US dollar. The statement was shared by Central Bank Governor John Mangudya.

The digital currency will allow users who are holding even small amounts of Zimbabwe dollars to exchange their money for digital tokens. These will allow them to store value and hedge against the current currency volatility.

Dr Mangudya stated: “The movements in the parallel market rate are mainly because of the expectations of increased foreign currency supply in the market when the tobacco marketing season opened.”

Mangudya also stressed that the current volatility of the exchange rate is due to expectations of increased foreign currency supply in the market.

Digital gold is now seen as a popular way to hedge against inflation as many nations around the world are experiencing the same economic concerns.

Gold has traditionally been a store of value for thousands of years and turning it into a digital representation would be quite the new milestone.

Mainly, it makes the asset much more liquid and easily transferable so Zimbabwe’s decision to test this out could be something many other nations are paying close attention to.

If it turns out to be successful, crypto investors and speculators believe that many other nations may soon follow suit in order to hedge against inflation.

Naturally, the size of the crypto market will also expand as there may be many new cryptos whose value are also backed by gold.

BeInCrypto concludes:

Of course, there have been many previous attempts to tokenize physical gold assets over the years.

For inspiration, the RBZ can look to existing cryptocurrencies like Gold Coin (GLC) and Meld Gold by Algorand (MCAU). Minted by well-known players in the crypto space, these tokens offer an alternative way for people to invest in gold. And without without having to physically hold it themselves.

In instances of gold-backed currency, blockchain technology providers often partner with specialists in precious metals trading and safekeeping.

As well as delegating responsibility for storage to professionals, tokenized gold also allows people to purchase smaller weights easily. Because no physical metal has to be processed when digital assets exchange hands, gold-backed crypto can lower barriers for entry to the investment class.

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