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Zimbabwe Sells Millions of Gold-backed Crypto Tokens, Shrugs off IMF Advice

Zimbabwe ignored the International Monetary Fund’s (IMF) caution and engaged in the sale of its gold-backed crypto tokens. As a result, the Reserve Bank of Zimbabwe recorded huge success selling its gold-backed digital assets worth 14 billion in its native currency or 39 million in United States dollars.

Zimbabwe’s Sale Of Gold-Backed Digital Tokens Attracts Mass Interest

According to an announcement, Zimbabwe’s central bank acknowledged receiving 135 applications for buying its gold-backed crypto assets. While the cumulative application for the newly launched tokens is about 14.07 billion Zimbabwean dollars.  

Related Reading: Bitcoin Tweets Surpass Dogecoin Despite Meme Coin Craze

The Zimbabwean apex bank launched the asset in April and made it available for purchase from May 8 to May 12. The digital tokens were backed by 139.57 kilograms of gold, and investors can store them on e-gold cards or electronic gold wallets.

Further, the bank set the token’s minimum vesting period of 180 days. Also, it set minimum purchasing amount levels of $10 and $5,000 for individuals and companies, respectively.

According to XE.com, the official exchange rate for the Zimbabwean dollar is 362 ZWD to 1 USD. However, the actual value is higher on the street.

The Zimbabwean central bank made this bold step with its gold-backed digital as part of its plans to stabilize the country’s economy. It plans to reverse the declining value of its fiat currency against the USD.

Following the success of the initial sales of the digital token, the central bank is gearing toward another sale round. The bank requested that interested investors submit applications by May 18 for settlement.

The Reserve Bank of Zimbabwe governor, Dr. John Mangudya, explained the importance of the newly launched tokens through a local news outlet. 

Mangudya mentioned that issuing gold-backed assets will expand the availability of value-preserving instruments in the economy. Also, the tokens will improve the public’s access to and use of investment products.

IMF Warned Zimbabwe Against Gold-Backed Crypto Tokens

The move to sell its gold-back crypto tokens came shortly after the International Monetary Fund (IMF) cautioned it. According to a report from Bloomberg, the IMF warned Zimbabwe against its plan with gold-backed crypto assets.

An IMF spokesperson stated that the country should carefully assess to ascertain that the token’s benefits outweigh the potential risks. Some highlighted risks include legal and operational risks, macroeconomic and financial stability risks, and governance risks.

The IMF also advised Zimbabwe to take alternative measures to stabilize its economy, such as advancing its foreign exchange market.

Zimbabwe Sells Millions of Gold-backed Crypto Tokens, Shrugs off IMF Advice

Also, it suggested that the country could explore tight monetary policies and the removal of exchange rates on transactions for banks, authorized financial dealers, and businesses. However, time will tell if IMF’s caution against risks will become a reality.

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Zimbabwe Will Issue Gold Coins To Control Inflation. Why Don’t They Use BTC?

Like most of the world’s, Zimbabwe ’s economy is in shambles. Is a gold coin the solution, though? It might just be. The country’s central bank announced “the “Mosi-oa-tunya” coin, named after Victoria falls.” It’s Zimbabwe’s response to a dire situation. According to Reuters, “annual inflation, which hit almost 192% in June, cast a shadow over President Emmerson Mnangagwa’s bid to revitalize the economy.”

In a highly unusual move, Zimbabwe ’s government created both a hedge against inflation and a highly-demanded product. A solution to a problem they created, sure, but still. The “Mosi-oa-tunya” coin might just work. “The gold coin will contain one troy ounce of gold and will be sold by Fidelity Gold Refinery, Aurex and local banks,” the article detailed. 

A gold coin is no bitcoin, but it certainly provides a solution for analog people. At the present moment, the necessary technology to use bitcoin is not accessible to everyone. Everyone deserves a hedge against inflation, though. And if it’s easy to get to, all the better. Back to Reuters’ Zimbabwe report:

“The central bank governor John Mangudya said in a statement on Monday that the coins will be available for sale from July 25 in local currency, U.S. dollars and other foreign currencies at a price based on the prevailing international price of gold and the cost of production.”

Of course, this leads to a giant unanswered question,

Why Don’t You Use Bitcoin, Zimbabwe?

Almost 8 months ago, rumors that Zimbabwe might be the second nation to adopt bitcoin as legal tender made the rounds. This was a massive step, considering Zimbabwe banned all kinds of cryptocurrencies “to protect the public” just four years ago. However, it more than made sense considering a new Finance Minister formed a governmental cryptocurrency unit to study the subject around the same time.

Always ready, NewsBTC reported on the bitcoin as legal tender rumor:

“Now that many citizens are demanding crypto, the government is considering the option seriously. They disclosed this information through one of their local news outlets.

The news also disclosed that the country is already discussing using Bitcoin as a legal tender – the Perm Sec Brig. Colonel Charles Wekwete confirmed this information. He also declared that the blockchain offers both positives and negatives.”

As it turns out, Zimbabwe wasn’t ready for hyperbitcoinization just yet. However, the Reuters story buried the lead. Hidden between the article’s lines was the real story.

BTC price chart for 07/06/2022 on Kraken | Source: BTC/USD on TradingView.com
US Dollar As Legal Tender?

Let’s not beat around the bush. The gold coins are cool, but a five-year dollar run is the real interesting part.

“Last week, Zimbabwe more than doubled its policy rate to 200% from 80% and outlined plans to make the U.S. dollar legal tender for the next five years to boost confidence.”

For those not up to date with Zimbabwe’s economic history, Reuters provides the cliff notes:

“Zimbabwe abandoned its inflation-ravaged dollar in 2009, opting instead to use foreign currencies, mostly the U.S. dollar. The government reintroduced the local currency in 2019, but it has rapidly lost value again.”

So, the country is no stranger to the U.S. dollar and it’s about to lose its local currency again. A country without a local currency, like El Salvador and the Central African Republic. That makes Zimbabwe a prime candidate for bitcoin adoption down the road. There’s no rush. It’s not clear if this was in reaction to the “Mosi-oa-tunya” coin news, but Binance’s CEO CZ recently tweeted, “Africa is primed for crypto adoption. 10-20% banked. Need financial access and inclusion. Blockchain provides that with a smart phone.”

Featured Image by Tim C. Gundert from Pixabay | Charts by TradingView

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What Factors Are Driving The Bitcoin Remittance Revolution In Africa? These Ones

The Bitcoin remittance business is blowing up all over the world. South African financial website moneyweb brings us the report directly from the oldest continent. The conditions that led to El Salvador making Bitcoin legal tender are present all over Africa. The people are unbanked but everybody has mobile phones. Plus, the diaspora is huge and sends money home constantly while big companies rob them blind with high fees. 

Related Reading | Is Largely Unbanked Africa Primed for Bitcoin Adoption?

“The African continent has many opportunities for widespread Bitcoin adoption. One of those opportunities is remittance fueled by Africa’s growing ~mobile~ population. There are over 30 million Africans living outside their countries of origin. Since 2012, the African Union considers the African diaspora the sixth Africa’s region.”

On one hand, “countries such as South Africa, Nigeria, and Kenya” want to regulate bitcoin and other cryptocurrencies. On the other, “According to the World Bank Global Findex, 60% of the population” in the continent are unbanked. The recipe is there. And Bitcoin remittances might be the use case to bring mass adoption to Africa.

Remittance Revolution, Factor 1. Mobile Wallets

Not only is the mobile population growing, but the whole continent also has ample experience with other forms of “mobile money.” It’s a concept already entrenched in the culture:

“Africa is the global leader in mobile money usage. Sub-Saharan Africa has the fastest growing mobile money industry in the world. The region will continue to see substantial growth in the number of people owning mobile phones. Mobile subscribers in Sub-Saharan Africa are projected to reach 623 million by 2025, half of the continent’s population. The figure will be even higher because of mobile phone sharing culture.”

From there to using Bitcoin, the most efficient money network in the world, it’s just a step. The road is clear.

Factor 2. Government Policies

Inadvertently, governments all over the African continent are pushing Bitcoin adoption with their restrictive policies. For example

“In 2020, the Central Bank of Nigeria suspended international mobile money transfers to Nigeria. The suspension came after the banking regulator allowed US dollar payouts for international remittances in the country.” And that “means that only Nigerians with a bank account will be able to receive money from abroad. Not all international money transfer services to Nigeria support cash payout.”

Everyone underestimates the rate of #Bitcoin adoption in Nigeria, it will be a major religion soon.

— Bernard ‘berlin’ Parah ⚡ (@bernard_parah) February 5, 2022

What have the Nigerians done? Turn to Bitcoin remittances, of course.

Another example:

“In Zimbabwe, several restrictive monetary policies have led to the growing interest and use of bitcoin for remittances. First, the government banned all foreign currencies such as the US dollar, Euro, South Africa rand, and others. The government also placed restrictions on mobile money services, as well as daily withdrawal limits because of severe fiat currency shortages. To bypass these restrictive policies by the central bank, a growing number of Zimbabweans prefer bitcoin remittances to fiat money.”

Remittance Revolution, Factor 3. Weak Currency

This factor wasn’t present in El Salvador, which is a dollarized country. However, in Africa, there are several “countries that experience double-digit inflation such as Zambia, Zimbabwe, Nigeria, Sudan, South Sudan, Ethiopia, Liberia, and Sierra Leone.” For example:

“The Guinean franc is one of the world’s weakest currencies as we launch into 2022. In 2020/21, the Zambian kwacha and Zimbabwe’s dollar were one of the worst performing currencies in the world. The Nigerian naira has lost more than 50% of its value since 2015. The Central Bank of Nigeria devalued the naira thrice in 2019. In May 2021, the central bank devalued the naira by 7.6%.”

What have the Nigerians done? Adopt Bitcoin remittances. What will the other countries do? Adopt Bitcoin remittances, also.

Who said Kenyans don't own #Bitcoin..

Kenya Ranks 2nd in Africa in P2P settlement, overtaking South Africa 🌍.#cryptocurrencyKE 🇰🇪#africarising 🖤 pic.twitter.com/fg8Ivj3mQA

— CRYPTOCURRENCY KENYA 🇰🇪 (@CryptoHubKE) February 8, 2022

Factor 4. Transfer Fees And Speed

The remittance fees were a prominent factor in the El Salvador story. And in Africa, the story repeats itself:

“A study by the World Bank shows that transfer fees to Sub-Saharan Africa, the poorest region in the world, are the highest in the entire world. The cost of sending $200 to Sub-Saharan Africa towards the end of 2020 was 8.2% on average. Sending money within Africa is even more expensive.”

What will the whole Sub-Saharan Africa do?

I could wait another 25 years for the ANC to do good on their promises to fix some of historical injustice in South Africa, or I can take control of my own life and buy #bitcoin now.

— Tensai Bankai⚡ (@tensaibankai) February 8, 2022

Remittance Revolution, Factor 5. Education

This is a positive one, for a change. According to BTrust’s Abubakar Nur Khalil, in a recent article for Bitcoin Magazine:

“Africa is home to more than a thousand indigenous languages, with non-English speaking countries. The majority of Bitcoin material available is in the English language, which means we must also engage in translation efforts to unlock knowledge for millions of non-English speakers on the continent, both on the developer and user front.

Currently, there are efforts around Africa to translate Bitcoin material into different languages such as Amharic, Arabic and Wolof by Kal Kassa, Arabic_HODL and Fodé Diop, respectively, with ongoing work on others.”

Related Reading | South African Man Loses $900,000 Worth Of Bitcoin After Accidentally Deleting Keys

And we also have to mention Exonumia, who is “creating open source African language translations for Bitcoin literature through community.” And, of course, the BTrust. The organization created and financed by Jay-Z and Jack Dorsey is on a mission to promote Bitcoin development in Africa and India. One of its board of directors members, Abubakar Nur Khalil, recently spoke to Bloomberg Technology about the initiative.

Meet one of the board members of Jay-Z’s and Jack Dorsey’s blind Bitcoin trust: Recursive Capital CEO Abubakar Nur Khalil in Nigeria. He tells @sonalibasak how he envisions web3 in Africa https://t.co/IdyBB7wTvb pic.twitter.com/eFKEga4Nbg

— Bloomberg Technology (@technology) February 4, 2022

Conclusions And The Market

There are negative factors that affect Bitcoin positively, like high fees, weak currencies, and worse government policies.  And there are positive ones, like high mobile adoption and available education. The mix might form a perfect storm for Bitcoin adoption in Africa. And the Bitcoin remittances revolution is leading the way.

BTC price chart for 02/10/2022 on Bitstamp| Source: BTC/USD on TradingView.com

After a recent surge of sorts, Bitcoin has been trading horizontally for the last few days.

Featured Image by James Wiseman on Unsplash | Charts by TradingView