Zimbabwe is exploring the launch of a gold-backed digital asset to stabilize its economy amidst the fluctuating status of the dollar. This stablecoin will be offered to investors as a hedge against the volatility of the Zimbabwean dollar, which has fluctuated in connection with the US dollar. The reserve bank of Zimbabwe is reportedly looking to launch this stablecoin as legal tender in the country to fight against inflation.
Stablecoins, unlike other independent cryptocurrencies, are pegged against a reserve asset like gold or the national currency, preventing them from undergoing major drops amid crypto volatility. Once the stablecoin is launched, the Zimbabwean government will reportedly allow the exchange of small denominations of the Zimbabwean dollar for the digital gold token to safeguard investments against market fluctuations.
Zimbabwe’s move towards establishing a stablecoin as an investment tool is the latest in a series of pro-crypto decisions taken by African countries. The crypto market in Nigeria, Kenya, Tanzania, and South Africa collectively grew by 1,200 percent, reaching a market valuation of $105.6 billion (roughly Rs. 775 crores) between 2020-2021. As per the IMF, Kenya, Nigeria, and South Africa have the highest number of crypto users in the region.
Moreover, the Central African Republic recently followed El Salvador in legalizing Bitcoin earlier this year. Nigeria has launched its own central bank digital currency (CBDC) called e-Naira for its nationals to use as an alternative to cash notes.