Zimbabwe Ignores IMF, Sells Millions Of Gold-Backed Crypto Tokens

Zimbabwe Ignores IMF, Sells Millions Of Gold-Backed Crypto Tokens

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The Reserve Bank of Zimbabwe’s first gold-backed cryptocurrency sale has been a resounding success. The country’s central bank managed to sell around 14 billion Zimbabwe dollars’ worth of gold-backed tokens. 

This puts the value of the digital tokens sold at around $39 million. 

A Resounding Success

The Reserve Bank of Zimbabwe went ahead with the sale of the gold-backed tokens despite a stern warning from the International Monetary Fund (IMF). The bank announced on the 12th of May, 2023, that it received 135 applications for a total of around 14.07 Zimbabwean dollars to purchase the gold-backed cryptocurrency. The Reserve Bank had announced plans to introduce a gold-backed digital currency as legal tender in an effort to help stabilize the local currency. The digital tokens will function as a type of electric money that will be backed by the country’s gold reserves held by the central bank. 

The crypto tokens were first introduced in April and are backed by 139.57 kilograms of gold. The sale in question ran from the 8th of May to the 12th of May. The minimum selling price of the tokens was set at $10 for individuals and $5000 for entities such as corporations and businesses. The minimum vesting period for the tokens has been set at 180 days, during which they can be held in e-gold wallets or e-gold cards. 

An Attempt To Stabilize The Economy 

The Zimbabwean Dollar is trading at an official rate of 362 Zimbabwean Dollars to $1. However, their value is far higher in unofficial markets. The move to issue gold-backed crypto tokens is viewed as an effort to stabilize the country’s faltering economy and the depreciation of its local currency against the US Dollar. The Reserve Bank of Zimbabwe added that there will be a second round of digital token sales and has already requested that applications be submitted by the end of the week. All applications submitted during the week would be settled by the 18th of May. Dr. John Mangudya, the Reserve Bank of Zimbabwe Governor, stated, 

“The issuance of the gold-backed digital tokens is meant to expand the value-preserving instruments available in the economy and enhance divisibility of the investment instruments and widen their access and usage by the public.”

The International Monetary Fund Warning 

Zimbabwe went ahead with its plans to sell gold-backed crypto tokens despite a stern warning from the International Monetary Fund (IMF). The IMF had stated that the country should redirect its efforts towards liberalizing its foreign exchange markets instead of adopting a gold-backed currency. An IMF spokesperson stated, 

“A careful assessment should be conducted to ensure the benefits from this measure outweigh the costs and potential risks including, for instance, macroeconomic and financial stability risks, legal and operational risks, governance risks, cost of forgone FX reserves.”

Zimbabwe has been reeling under heavy inflation and extreme currency volatility for the better part of a decade. The country adopted the United States Dollar as its currency in 2009 following a prolonged phase of hyperinflation that left its original currency in ruins. The Zimbabwe Dollar saw a reintroduction after a decade in 2019, but volatility issues continue to plague the currency.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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