Zimbabwe Gold-Backed Digital Tokens Attract Over $14 Billion ZW In First Issue

Key Points:

• The central bank of Zimbabwe received 135 applications worth ZWL 14 billion for its gold-backed digital tokens in the first week of sales, indicating strong interest in the new currency.
• The second auction for Zimbabwe’s gold-backed digital tokens is scheduled for May 18 as the market tests out the process before converting significant Zim$ reserves into gold tokens.

The central bank received 135 applications worth ZWL 14 billion for its gold-backed digital tokens. The second auction is on May 18.

Zimbabwe has been grappling with currency volatility and inflation for over a decade. In 2009, the country abandoned its currency due to hyperinflation, replacing it mainly with the US dollar. In an attempt to resuscitate the country’s stagnant economy, the Zimbabwe dollar was reinstated in 2019. Still, in June of that year, the government again declared the greenback legal currency to curb wild price hikes.

Last year, the government decided to use the US dollar again in a bid to curb surging prices in the country. Three weeks ago, the Reserve Bank of Zimbabwe (RBZ) announced plans to establish a digital currency backed by gold that would be legal for domestic transactions. The central bank’s latest plan will allow small amounts of Zimbabwean dollars to be exchanged for the digital gold token, enabling more Zimbabweans to hedge against currency volatility.

The International Monetary Fund (IMF) has cautioned Zimbabwe against the plan, stating that a careful assessment should be conducted to ensure the benefits from this measure outweigh the costs and potential risks, including macroeconomic and financial stability risks, legal and operational risks, governance risks, and the cost of forgone FX reserves.

Despite this, the central bank started selling digital tokens to investors on May 10, 2023, for a minimum price of $10 for individuals and $5,000 for corporates and other entities. This is part of efforts to reduce demand for US dollars that now supersede the local unit as the preferred currency for transactions.

The central bank received 135 applications valued at 14 billion Zimbabwe dollars ($12 million) to purchase the gold-backed digital tokens. It plans a second auction on May 18. Zimbabwe used nearly 140 kilograms of gold reserves to back the first sale of its digital money. It appears the market is testing out the process before committing to converting significant Zim$ reserves into gold tokens, but still, it was a respectable first week.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

Join us to keep track of news: https://linktr.ee/coincu

Thana

Coincu News