The Reserve Bank of Zimbabwe (RBZ) has recently sold 14 billion Zimbabwe Dollars’ worth of gold-backed digital tokens, totaling around $39 million, despite a warning from the International Monetary Fund (IMF). On May 12, the central bank of Zimbabwe announced that it had received 135 applications valued at ZW$14.07 billion to purchase the gold-backed cryptocurrency. These tokens, first introduced in April, are backed by 139.57 kilograms of gold and were sold at a minimum price of $10 for individuals and $5,000 for corporations and entities.
The Zimbabwe dollar is officially trading at 362 ZWD to USD according to XE.com, making the stash worth around $38.9 million. The minimum vesting period for these tokens is 180 days, after which they can be held in e-gold wallets or on e-gold cards. This move was reportedly made to stabilize the country’s economy and address the continued depreciation of the local currency against the US dollar.
A second round of digital token sales is expected to take place, with the bank requesting applications to be submitted this week in order to be settled by May 18. RBZ Governor Dr. John Mangudya commented that the issuance of gold-backed digital tokens aims to “expand the value-preserving instruments available in the economy and enhance divisibility of the investment instruments and widen their access and usage by the public.”
However, this initiative follows a caution from the IMF, which has opposed the African nation’s plan for a gold-backed currency. Instead, the organization recommends the country liberalize its foreign-exchange market, as per a May 9 Bloomberg report. An IMF spokesperson shared concerns that various risks could arise, including “macroeconomic and financial stability risks, legal and operational risks, governance risks, and cost of forgone FX reserves.”
Zimbabwe has been struggling with currency volatility and inflation for over a decade. In 2009, it adopted the USD as its currency, following a period of hyperinflation that rendered the local currency essentially worthless. Despite reintroducing the Zimbabwe dollar in 2019 to revive the local economy, volatility ensued once again.
While the gold-backed tokens have the potential to provide some stability for the nation’s struggling economy, the IMF’s concerns should not be disregarded. Weighing the benefits against potential risks will be crucial in determining the future effectiveness and viability of the gold-backed digital currency. In the meantime, the debate over the pros and cons of this initiative will likely continue as Zimbabwe navigates its currency challenges.
Source: Cointelegraph
