Zimbabwe is debuting a gold-backed digital currency as it battles an inflation crisis.
This was in reference to a steep decline in the value of Zimbabwe dollar, which has dropped by more than half since the end of last year, falling to about 2,200 against the U.S. dollar.
The Reserve Bank of Zimbabwe says the digital tokens will be backed by gold in its reserves and can be redeemed at international prices after 180 days. But analysts have called the plan a distraction from the core causes of the country’s currency troubles, the news outlet said.
The tokens have “absolutely nothing to do with what’s happening on the ground — it is a sideshow,” economist Tinashe Murapata told the newspaper, adding that the central bank had offered few additional details on the physical gold backing for its plan.
As ordinary Zimbabweans shift away from the local currency, its decline “is the thing [the bank] should be worried about,” said Murapata.
The launch of Zimbabwe’s digital currency comes as a host of countries look to launch their own central bank digital currencies (CBDC), with various degrees of success.
For example, last week saw the publication of a paper by economist Ignazio Angeloni and prepared by the Economic Governance and EMU Scrutiny Unit at the request of the European Parliament’s Committee on Economic Affairs (ECON) that delves into the future of digital currencies in Europe.
As PYMNTS noted, the title of the paper gives away where the author comes down on the issue: “Digital Euro: When in Doubt, Abstain (But Be Prepared).”
Angeloni argues that the European Central Bank “should continue its exploration, including a testing phase, but in the end not launch a [prospective digital euro (PDE)] unless new elements emerge strongly supporting such a decision. At the present time, the risks and imponderables of this enterprise are stronger than the arguments in favor of it.”
Elsewhere in Africa, a cash shortage in Nigeria caused the country’s digital currency to become much more popular in March, when the value of eNaria transactions jumped 63%
“The eNaira has emerged as the electronic payment channel of choice for financial inclusion and executing social interventions,” said Central Bank of Nigeria Governor Godwin Emefiele.