Zimbabwe's innovative solution to runaway inflation

Zimbabwe regularly breaks the record for the most inflationary economies in the world. To solve the problem, digital assets are offered as an alternative. Recently, the central bank talked about plans to launch a gold-backed CBDC. The initiative should see the light of day soon.

Zimbabwe’s central bank calls on citizens to subscribe to its CBDC

Zimbabwe is pulling out all the stops to make its gold-backed CBDC project a reality. An initiative announced recently and aims to combat the endemic inflation of the country’s economy.

This Friday, May 5, the Reserve Bank of Zimbabwe (RBZ) launched an appeal to citizens from the country. The latter are invited to subscribe massively to the CBDC project, which should be launched on May 9.

With this in mind, the financial institution has published the minimum conditions required to subscribe. They differ significantly depending on whether the subscribers are natural persons or legal persons.

Thus, a minimum amount of 10 dollars is required for all subscription requests sent by individuals. For financial institutions and businesses, this minimum threshold is set at $5,000.

The launch plan: a two-phase approach

In a note it released, the Zimbabwean central bank details the plan to launch its CBDC project. This should take place in two phases. The first launch phase is for purely financial purposes.

At this stage, CBDCs will be issued for investment purposes. They can only be sold through banks. The holding of tokens in wallets is made accessible for the second phase. Transactions between individuals, or from individuals to companies, will then be possible.

“Holders of physical gold coins will be able, at their discretion, to exchange or convert, through the banking system, the physical gold coins into gold-backed digital tokens”the bank said.

The RBZ thus hopes to be able to curb the ever galloping inflation of the national economy. According to recent data, the latter posted a rate of 87.6% in March 2023. A figure far from the peak of 285% reached last year.

It remains to be seen whether this CBDC project will meet with the enthusiasm it needs to remain economically viable.

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