Zimbabwe continues to ignore IMF warnings and sell millions of gold-backed crypto tokens

By: Michael Wilson

May 15, 2023 7:18 AM

The first gold-backed cryptocurrency sale by the Reserve Bank of Zimbabwe was a success.

In defiance of a warning from the International Monetary Fund, the Reserve Bank of Zimbabwe recently sold digital tokens backed by 14 billion Zimbabwean dollars, or about $39 million.

On May 12, the Zimbabwean government's central bank revealed that it had received 135 requests to purchase the gold-backed cryptocurrency, totaling 14.07 billion Zimbabwean dollars.

Using XE.com's→ exchange rate of 362 ZWD to 1 USD (but significantly higher on the black market), the value of the hoard is around $38.9 million.

The crypto tokens, first offered in April, are backed by 139.57 kg of gold, and the sale will take place from May 8 through May 12.

Results of digital currency sale backed by gold. Source: Reserve Bank of Zimbabwe

Individuals paid a minimum of $10 for the tokens, while corporations and other organizations paid a minimum of $5,000. The tokens have a minimum vesting duration of 180 days and can be stored in e-gold wallets or on e-gold cards.

The decision is purportedly part of an effort to stabilize the country's economy and the local currency's continuous slide versus the US dollar.

A second round of digital token sales will be undertaken, and the bank has asked that applications be submitted this week so that they can be finalized by May 18. RBZ Governor Dr. John Mangudya, according to local media, stated→:

"The issuance of the gold-backed digital tokens is meant to expand the value-preserving instruments available to the economy as well as improve divisibility of the financial instruments and widen their access and usage by the people."

According to a May 9 Bloomberg story→, the decision follows a warning from the International Monetary Fund against the African nation's idea for the gold-backed currency, urging that it should instead liberalize its foreign-exchange market.

An IMF spokesperson told Bloomberg, "A careful assessment should be conducted to ensure the benefits from this measure outweigh the costs and potential risks." These costs and risks could include things like the risk to the economy and the financial system, the risk to operations and the government, and the cost of foregone foreign exchange reserves.

For more than a decade, Zimbabwe has struggled with currency fluctuation and inflation. Following a period of hyperinflation that rendered the local currency worthless, the government adopted the USD as its currency in 2009.

The Zimbabwe dollar was resurrected in 2019 in order to revitalize the local economy, however, instability returned.