The Reserve Bank of Zimbabwe (RBZ) successfully conducted its inaugural sale of a gold-backed cryptocurrency in a pivotal move that has overtaken the digital financial market. This strategic move was made to bolster the country’s economy, despite the International Monetary Fund (IMF) warnings.
The Unprecedented Sale of Gold-Backed Digital Tokens
The RBZ announced on May 12 that it had successfully sold Z$14 billion worth of gold-backed digital tokens. That is equivalent to approximately $39 million. This success was achieved notwithstanding the IMF’s cautious stance towards this unconventional financial endeavor.
An overwhelming 135 applications were received, totaling Z$14.07 billion in requests to purchase the newly introduced cryptocurrency.
The Zimbabwean dollar trades at 362 to the US dollar, but the street value is considerably higher. Based on the official rate, the amount raised is estimated to be about $38.9 million.
The Intricacies of the Gold-Backed Cryptocurrency
Introduced just a month prior, these crypto tokens are supported by a robust 139.57 kilograms of gold. The sale period spanned from May 8 to May 12. The digital tokens were made available at a base price of $10 for individual investors, and $5,000 for corporations and other business entities.
The gold-backed tokens have a minimum vesting period of 180 days and can be conveniently stored in e-gold wallets or on e-gold cards.
This pioneering step is part of a broader strategy to anchor the country’s fluctuating economy and counter the persistent depreciation of the local currency against the US dollar.
Dr. John Mangudya, the RBZ Governor, remarked on the development:
“The issuance of the gold-backed digital tokens aims to diversify the value-preserving instruments available in the economy. In addition, it is intended to enhance the divisibility of investment instruments and broaden their accessibility and use by the public.”
Future Sales and IMF Caution
The Reserve Bank of Zimbabwe is set to conduct a second round of digital token sales, calling for applications to be submitted for settlement by May 18.
Despite this progress, the IMF has expressed reservations about Zimbabwe’s initiative. The IMF suggested the African nation should instead focus on liberalizing its foreign-exchange market, as per a Bloomberg report on May 9.
The international body emphasized the need for a thorough assessment to ensure that the benefits outweigh the costs and potential risks.
Zimbabwe’s Battle with Inflation and Currency Volatility
Zimbabwe has grappled with currency instability and rampant inflation for over a decade. In an attempt to regain control, the country adopted the USD as its official currency in 2009 after hyperinflation rendered the Zimbabwean dollar virtually worthless.
The local currency was reintroduced in 2019 to revitalize the economy. However, the country experienced volatility again, leading to the current exploration of gold-backed digital tokens as a potential solution.
In conclusion, Zimbabwe’s first sale of a gold-backed cryptocurrency marks a daring step towards economic stability. However, amid international concern and domestic volatility, the success of this approach remains to be seen. The sale’s success is a thorn in the side of the IMF, which feels Zimbabwe has bigger fish to fry first.
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