The Reserve Bank of Zimbabwe (RBZ) is contemplating a gold-backed digital currency as part of its sustained efforts to stabilize the domestic currency. The Zimbabwean dollar is widely known for its volatility, so the move could offer an alternative investment avenue for citizens to maintain the value of their savings. Nonetheless, past efforts to peg the currency to other assets have often resulted in scandals that have slowly eroded people’s trust in the central bank.
The RBZ has long struggled to tame the depreciation of the Zimbabwean dollar. During the mid-2000s, monthly inflation peaked at 79.6 billion percent forcing the government to abandon printing the domestic currency entirely. Eventually, the country was able to ease inflation pressures thanks to the adoption of a combination of foreign currencies, with the US dollar and the South African rand as the main ones widely used. But the conversion to a new Zimbabwean dollar in 2019 marked the return of high inflation, which has since hovered at more than 100%.
Hence, the RBZ is now considering a gold-backed digital currency to provide a store of value function rather than a means of payment. The primary intention is to let Zimbabweans protect their savings and hedge against the country’s intractable exchange rate volatility with a central-bank-backed digital asset. RBZ Governor Dr. John Mangudya told local sources that the digital gold tokens would allow the government to address the high demand for foreign currency and offer poor citizens a way to maintain the value of their savings.
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