Zimbabwe goes against IMF warning and sells gold-backed crypto tokens

Zimbabwe’s financial authorities ignored IMF’s warnings and launched the sale of gold-backed digital tokens. Last year, the country successfully issued physical gold coins, which sold like hotcakes.

Gold-backed crypto tokens

Zimbabwe has shrugged off IMF warnings and revived the gold standard in an attempt to combat raging inflation and restore stability to the country’s economy. The Reserve Bank of Zimbabwe (RBZ) has issued gold-backed digital tokens (GBDT) as legal tender in a move to stabilize local currency suffering from the depreciation against the US dollar.

According to local media, RBZ sold 14 077 million Zimbabwean dollars’ (nearly $3,9 million) worth of crypto tokens backed by 139,57 kilograms of gold during the initial sale. The offer opened on Monday last week and closed on Wednesday, the payment was due on Thursday, and the tokens were issued on Friday. A second round of sales is pending and will be settled by May 18.

The project’s declared aim is to enable regular Zimbabweans to exchange their money for tokens and hedge their assets against exchange rate volatility. The call for applications for crypto tokens issued by the RBZ has been addressed to individuals, financial institutions, corporates, and other entities with the minimum amount set at $10 for individuals and $5,000 for institutional parties. However, banks participating in the project received only 135 applications (132 in local currency and three remaining in US dollars), which indicates that few or no individuals have had a bite of the golden crypto cake so far.

According to the prospectus, the tokens are issued with a vesting period of 180 days, during which the assets are locked up and cannot be traded or transacted. After that, they can be redeemed in the same way as the existing physical gold coins. Although the name is not mentioned, the prospectus refers to the Mosi-oa-Tunya coins introduced in July 2022 to shift the demand from US dollars as a store of value to the precious metal. After the collapse of the Zimbabwe dollar last year, inflation in the country exceeded 250%.

Zimbabwe’s gold standard experiments haven’t escaped the watchful eye of the International Monetary Fund (IMF). The Washington-headquartered UN’s financial agency cautioned the African country against using gold-backed currency to deal with volatility and liberalize its foreign-exchange market instead.

However, going against the IMF’s “advice” may not necessarily turn out to be a mistake for Zimbabwe. The physical gold coin issuance has been a success, prompting another offering soon after. And as regards the IMF-recommended policies, the institution, which has been a borrower of the last resort for crisis-stricken countries, has long been criticized for harmful loan arrangements contributing to poverty and hard-core neoliberal policies leading to the creation of monopolies and consumer exploitation.