Zimbabwe Introduces New Currency, This Is What You Should Know

Zimbabwe unveiled a digital currency backed by gold on Monday to be used for peer-to-peer and peer-to-business transactions as well as to serve as a store of value as the local currency continues to depreciate against other major currencies.

“Holders of physical gold coins, at their discretion, will be able to exchange or convert, through the banking system… into gold-backed digital tokens,” the Reserve Bank of Zimbabwe said in a statement inviting individual and corporate entities to use the digital currency that can be bought either in Zimbabwean dollars or foreign currency.

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According to Aljazeera, the country now joins other African states like Nigeria, Ghana and South Africa that have introduced digital currencies, even as several others have plans in the works.

But the digital currency, the first ever by the country’s central bank, hit the market Monday to lukewarm reception from economists and ordinary Zimbabweans.

Here’s all you need to know about the new currency.

What is a gold-backed digital currency?

Backed by a certain amount of gold, which helps keep its value stable, this currency is tied to the market value of the gold – unlike a fiat currency.

The Zimbabwe gold-backed digital currency will be used as legal tender and a store of value alongside the Zimbabwean dollar and bond notes.

Users can buy and sell it using Zimbabwean dollars and other foreign currencies.

Ideally, backing a digital currency with gold involves having a certain measure of gold reserves and depends on the current market value of gold.

According to state-owned media reports, Zimbabwe in April had 350kgs (12,346 ounces) of gold in reserves valued at $22.80m at the current price and intends to build reserves to around $100m.

8)::The introduction of the gold backed digital currency is therefore a psychopathic exercise in self delusion.The Zimbabwe dollar has failed because of the absence of #trust in the regime . The digital currency will suffer the same brutal fate that the local dollar has suffered pic.twitter.com/feayejLMRT

— TENDAI BITI (@BitiTendai) May 5, 2023

Others said a lack of trust in the e-currency could hinder progress.

Steve Hanke, a professor of applied economics at John Hopkins University in the US, said the gold coins are bound to fail like the gold coins before them.

“After making inaccessible gold coins legal tender in 2022, Zimbabwe is trying to salvage the Zim dollar with another bizarre idea: introducing a digital currency next month,” Hanke said. “Enough is enough. Zim must mothball the Reserve Bank & officially adopt the USD.”