In an attempt to bring more stability to the overall Zimbabwean economy, the Reserve Bank of Zimbabwe decided to launch gold-backed digital tokens. The idea behind this move was to enable the investors interested in investing in these digital coins to first hold and trade their tokens and, once enough time passes, trade and make payments using them.
Now, in theory, this sounds like a move that could potentially bring greater economic stability to Zimbabwe. However, not all experts share the notion. Since the price of these gold-backed digital coins will directly depend on Zimbabwe’s gold reserves, one of the major concerns is that the tokens will become unattainable for many. Unlike some other cryptocurrencies and their respective prices, investors could face greater price volatility with these tokens, compared to the XLM price, for instance. This is due to the simple fact that XLM has already been established on the market, and has already gone through various ups and downs, which has led to the price currently reaching a rather stable flow.
Ever since the dramatic collapse of the Zimbabwean dollar back in 2008, the hyperinflation that’s persistent in this part of the world is constantly being discussed by various experts.
The devaluation of the local currency was a direct result of a steady inflation growth, which reached 107% in November 2022, followed by 175,8% in June this year. Such a dramatic inflation increase could, of course, result in devastating financial turmoil, which could leave the entire country in a less-than-favorable position.
The main concern when it comes to gold-backed digital tokens is that such a move simply won’t be enough to help the country put a stop to this money supply growth. So, unless the governing bodies find a way to reduce the amount of money that’s currently being in use in the overall economy, introducing yet another asset is not likely to make a big difference.
Another apparent issue is that the country’s official “Zim” dollar is quite volatile in and of itself, so the majority of the population is looking to exchange it for USD as soon as possible. Of course, this leads to a noticeable decrease in the domestic currency, and increases the amount of foreign currency that’s circulating the market.
Ideally, the gold-backed digital currency should be the answer to this issue, as it should theoretically reduce the need for such exchanges to take place so frequently and bring more stability and peace of mind to Zimbabweans across the country.
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