Issuing Gold-indexed Digital Currency, This Country Didn’t Heed The IMF’s Warnings!

in Zimbabwe banks, newly introduced gold supported digital coins can offer loans using it as collateral.

Use of Gold Backed Digital Currencies Increases in Zimbabwe

The Zimbabwe Bankers Association said in an email response to questions on Thursday that the digital currency the central bank envisions for use in day-to-day transactions will force lenders to “enable a third currency in their systems” to facilitate payments.

“As balances on gold-backed digital tokens trading with the currency increase, banks have the potential to offer all products offered in Zimbabwe dollars and US dollars,” the statement said.

The South African country introduced the digital currency to help contain the growing demand for the US dollar in the economy as the value of the local currency fell. The local currency has lost more than 50% of its value this year.

The move was criticized by the International Monetary Fund, which urged the government to liberalize the exchange rate rather than risk depleting its reserves. The Zimbabwe government does not seem to have heeded the IMF’s warnings.

The central bank received 135 applications last week worth 14 billion Zimbabwean dollars ($11 million) to purchase tokens backed by 140 kilograms of gold reserves.

A second auction held on Thursday sold 71.6 kilograms of gold tokens.

“So far it is seen as a value protection tool and there is a steady increase in demand for gold-backed digital tokens,” the banks association said.

Johannesburg-based lenders in Zimbabwe Standard Bank Group Ltd. And of Nedbank Ltd local units.

*Not investment advice.