following devaluations of the local currency. Researchers are not convinced that a digital token will solve the country’s currency woes.
The reason experts are skeptical of the gold-backed digital token’s prowess is because it may not be enough to stop money supply growth, which is the real problem at hand. A digital token, without strong macroeconomic policies in place, cannot reduce the amount of money circulating in the economy, Chitambara said.In Zimbabwe, people can now use both the new Zimbabwean dollar and the U.S. dollar.
In a situation of hyperinflation, like the one Zimbabwe is in, people are always going to “look for a store of value, something that is going to protect their purchasing power,” Paul said. Too many Zimbabwean dollars have been chasing U.S. dollars and this has caused the local currency to depreciate, Chitambara said. The idea is to introduce the gold-backed digital currency to reduce reliance on the U.S. dollar and eliminate that exchange rate volatility, said Varun Paul, central bank digital currency and market infrastructure director at institutional crypto custody platform Fireblocks.
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