Bitcoin Forum

Joining the list of countries who have been strongly hit by inflation, Zimbabwe see red. The Reserve Bank of Zimbabwe on Monday announced it's plan to introduce gold coins as means of value to tame inflation. The one-troy-ounce gold coins tagged the "Mosi-oa-tunya" meaning "smoke that thunders", has been elected as the torch bearer to show them the way.
 
John Mangudya, RBZ Central Bank governor intimated that the issuance and sale of these gold coins will take effect from the 25th of this month. The inflation in the Southern African country has been mounting pressure on a population struggling with shortages, severe water and sanitation crisis, forced evictions during the COVID-19 pandemic and child marriages to name a few.

 The Zimbabwean dollar (ZWD) was the country's official fiat from 1980-2009, but was abandoned due to its inflation ravaged nature for other foreign currencies like the dollar. Plans to make the US dollar a legal tender for five years, probably to help boost their economy.
 
Instead of adopting the US dollar as a legal tender, why not borrow a leaf from El Salvador and Central African Republic and use BTC? https://www.google.com/url?q=https://www.reuters.com/business/zimbabwe-introduce-gold-coins-local-currency-tumbles-2022-07-05/&sa=U&ved=2ahUKEwj81uKAkeL4AhWCyKQKHU-dBN4QFnoECAAQAg&usg=AOvVaw2fXRK8BL4WQRSOH2YlpqVB

I'm failing to see how this approach can actually help with inflation. Gold is used globally by individuals as a hedge for inflation, making gold a legal tender would not necessarily affect spending or inflation rates; It is just sort of a reminder to the citizens that they can explore other hedges against inflation, while the currency collapses.

It also comes as no surprise that the citizens are actually not bought into the idea of trading off their local currency for gold coins. The country has shown inability to maintain the economy over the years and has been unable to instill any sort of confidence in the populace, and even switching to USD and abandoning their local currency again would do little to change that.

Zimbabwe is beset with uncertainty. Adopting any currency because of the impact that has lost public confidence in the government's failure to deal with inflation will continue to have a long tail. Whether using gold or dollars, in fact for now it will only be temporary. The main task remains to restore the value of fiat to a better level. The government there is confused about where to start, based on the hampered economic movement, getting out of the zone of destruction can no longer be contained.

If we compare the situation in Zimbabwe, it is similar to Venezuela, and if we look for the level of Bitcoin usage after adoption, we will find that it is less than 5%, so I do not expect the adoption of Bitcoin in that country to change, is there a good electricity infrastructure? Is there a stable internet? Is there knowledge of digital cash?

The use of gold will be good because they do not have an official currency, and therefore it will relieve pressure on the government, but how will gold be ensured? And how to ensure that fraud does not occur?

There was a reason why gold coins went into oblivion, there was a time when people used both gold and silver coins but at the end of the day they stopped, the reason would be limited supply, inflation, what are they going to do with the capital tax as well, how are they going to handle it, then there comes the volatility as well. I do think that one can understand the fact why this plan won't go that good as well. I do think that they should actually work on making more jobs available for the people and at the same time make things better on a individual basis as well, instead of letting the government introduce new gold coins.

It seems like deja vu with the previous Zimbabwe currency crash - in turbulent times weaker currencies like these are the first to go down as people flock to much safer places. With inflation spiraling out of control in many countries, people simply do not want it and cannot trust the Zimbabwe government to act responsibly. At least it has not reached the dismal lows of hyper inflation which saw trillion dollar notes created which lost value very quickly. One day it'll be nice if people don't step in and wave Bitcoin around like it is some magic bullet to every currency crisis, it simply is inaccessible to many people in poorer countries and cannot handle anywhere near the transaction loads that are required.

Zimbabwe officially apply uses of multiple currencies which means is that any currency can be legally used in Zimbabwe if trading parties agree to it.
In other words, gold, bitcoin or any other currency can be considered legal tender.
Zimbabwe has its own coin Zimbabwe dollar (the RTGS Dollar) therefore Zimbabwe deserves to be an extreme example of how inflation can wipe out a country's economy.

Look at https://en.wikipedia.org/wiki/Zimbabwean_dollar#Devaluation_of_the_fourth_dollar

I see it as a desperate move, no government will let its fiat disappear and adopt gold unless they did not had too much of a choice, however if was one of the citizens of Zimbabwe I will be incredibly worried about this, since I will not trust at all those coins are actually made of gold or if those coins actually have the gold content the government claims, so in that situation it is better to keep whatever dollars and other foreign currencies people got as this seems to me as an effort by the government to try to get some foreign currency out of their citizens.

Actually, As Venezuelan I am pretty sure that our case is quite different from what is happening in Zimbabwe. They had banknotes of trillions of dollars; we removed 14 zeros to our currency: 3 on 2007, 5 in 2018 and 6 in 2021.

Our inflation has slow down significatively and thus we still use our local currency, together with USD, for example.
And we indeed have quite an important volume of crypto-currencies and Binance is becoming a very common custodial wallet to pay for goods an services with stablecoins.


In my oponion if they plan to literally mint gold coins for circulation, that could create a challenge when comes to preventing counterfeits. I believe it would be enough and easier to relauch the national currency, using bills which are extremely difficult to counterfeit and peg the currency to the gold within the national treasury.

Crypto-currency as legal tender in such country with infrastructure problems and probably difficulties to access to internet sounds uneffective, at least for now.

They have to secure themselves first with the main currency where they'll be known and such as Zimbabwe. At least for this country, they're trying to resolve and finding a way to get out of inflation but this isn't just all about changing the legal tender.

How many currencies they've got right now aside from their own bank note/legal tender? They should be firm on this one before they resort to another possible solution because it will cost them a lot of loss.

Yeah, I may agree about doing the same thing about CAR and El Salvador of adding bitcoin as a legal tender while having those other currencies they think will save their economy.

Well I don't know what to call this as either to term it a progress or a showcase of a crab move, Zimbabwe have tried in making its first move in realising the need to help its economy to survival but i think the approach used here isn't that an effective one since we have the globally and acceptable digital currency for an exchange which is bitcoin could have serve a dual purpose or more for them towards sustaining their economy against inflation and the present dip on bitcoin price is not a barrier to using bitcoin for the arrival of an expected result.

"Gold is money, everything else is credit."  --JP Morgan

Gold being likely to appreciate in value during eras of high inflation and economic recession, solves the basic problem with inflation.

Which is poor to middle class earners lacking access to inflation protected assets which could protect their wealth from inflation devaluation.

Gold isn't a perfect solution. It can be prone towards scams. Metals like tungsten which have a similar density and volume to weight ratio as gold can be used to make counterfeit gold bars and coins. Gold has many known issues.

For the majority of applications gold is still a great candidate for inflation protection.

The big question now is whether other nations will demand support for gold based financial infrastructure and laws.

I bet the average person in Zimbabwe can't afford one of those shiny new gold coins. And even if they could, it doesn't solve the problem. The coin is too valuable to buy groceries, so you're stuck with inflation money for that.

Well said. While I can easily see those shiny gold coins as wonderful collectibles, I don't think that they can be much more than that, since, as you said, it's too expensive for small denominations that would be useful for common people.
I guess that it's supposed to be some idiotic marketing stunt for their worthless currency. But if they can't do better, they'd better stick to USD (as they've been lately) or, why not, switch to bitcoin.

Zimbabwe is hit by inflation years back itself, and till date there is no big progress. The gold coin from the government is not gonna give them the expected results. Zimbabwe when hit by inflation, economist suggested to go for the adoption of bitcoin and make Zimbabwe the fintech centre. Fortunately nothing happened, if they've adopted bitcoin by then, now it could've come out of inflation atleast by a small margin.

USD is much safer currency for the to choose because it will be sustainable for their country to have this for now since the USD currency is doing strong and provably they can get advantage for taking this as another option.

Maybe they their government is experimenting on what will be the effect for doing that and for sure this is not sustainable for them for long term.

Actually Bitcoin may be a better choice - more future proof and has a very good chance to grow in value greatly in the following years.
USD is a choice only because they've had it and may have the infrastructure already set up and because with such troubles they may want to be in IMF's favors.

I don't think that Zimbabweans for now are adequately educated in the midst of a crisis, they won't be ready with something like bitcoin. Even when foreign currency is enforced, they are preoccupied with only getting a small piece of $. Read this story (https://www.theglobeandmail.com/world/article-in-zimbabwe-the-country-with-no-coins-us1-is-more-useful-than-us100/)

They're not going after it either. Currency with a greater value is not very valuable.
Maybe they have a way of creating a gold coin that is worth $1 each.

The devil is in the details, as always


So what they are trying to do here is get some more funding for their gold reserves that are getting turned into coins, it's basically selling gold at an extra price and not trying to revive the gold standard or anything else.

Coins will be more like collectibles with their own serial number, you'll have to go though KYC and good luck actually trying to use it as something in the real economy, it does say it can be used but how will this actually work? Gold coins were more used in video games than in actual life, from antiquity to the middle ages people used silver coins and often they would split those into two or 4 pieces to cover purchases and depending on the country and age resort to copper pieces for change.

This coin will have ~30 grams, so ~$1700, how could you use it for more than 0.1% of the situations there?

I've had the feeling that this is the case. It would have been very odd to use it in the actual economy.
Thank you for properly looking it up!

Hard to go back to our old system where money us backed by gold. there is no system that does that anymore even if US will start making it with their political block nor with China. There is no trust anyone as to who will hold the gold reserve because as far as Ii know Venezuelan Gold was never returned to their government when they requested it. Also Russia's gold as well. No country will trust anyone with their gold for the reserve.

Just go digital, CBDC that's where we are going anyway.

Zimbabwe is not able to do this because there are wider concerns for that country rather than just to download a wallet and start transacting with the crypto currencies.

The internet cost is huge for Zimbabwe and they are almost paying $75 for 1 GB data throughout their country.
This means, if I am an individual who wish to use any desktop wallet for bitcoin which is usually 200-500 MB in size, I would end up paying $40 bucks just to download the wallet!

Just imaging, synching the wallet with global settings, downloading packets of data and using it on regular basis, would cost me more than what can I earn or use. 

I think this would have been better for Zimbabwe instead of the dollar since fiat has failed them already. The corruption that collapsed the Zimbabwean currency will also have an adverse effect on the dollar. There is alot of benefit for approval of bitcoin in Zimbabwe and one is that those Zimbabweans working out of the shores of there country can transfer money home through bitcoin and that can rejuvenate their economy through investment and hodling naturally may increase individual earnings and the currency can get back in value.

That's a myth and it was because BBC used an already out od date exchange rate which nobody cared about but stayed there on official sites.
https://zimfact.org/does-1gig-of-data-cost-us75-in-zimbabwe-as-claimed-by-the-bbc/

Besides, electrum is just 40MB and is designed exactly to be lightweight, you won't be reaching that 1GB in years you would exceed that way faster by browsing WoT or looking at cat pics, and when I say faster I mean a few days.



What would be the difference between adopting USD or BTC for the average citizen?
First, they would have to get those BTC , which is the same thing s trying to get USD with a failed currency and will do exactly the same damage to the economy, everyone will rush to sell Zimbabwe currency and buy coins, destroying the peg even more as obviously nobody wants their currency. And after that, where will the money and investment come from magically? In order for the population to make a profit on their bitcoin purchase, they would have to sell it to others at a higher price, you see the vicious circle here?

Bitcoin is money, you need money in order to get money, in order to invest you need to let that money go, it's not something magical, oh we bought 100 BTC our economy will thrive.

Satoshi didn't create Bitcoin to rejuvenate the industry or make some holders rich and never pretend to be a magical cure for everything.
Bitcoin is perfect at transferring value without intermediaries, but in order to do that, you need to have that value in the first place.

That's 18 mg of gold, or slightly less than a thousandth of a millilitre. That won't work for gold, and probably not even for silver.

Bitcoin does not improve economies, or rather, it is a great technological tool to start having a change, but like the green currency (USD) that several countries in the world have established as legal tender, it does not work miracles.

El Salvador, I mention it because you quote it but they are different circumstances, very equidistant from Zimbabwe, what they have in common is their poverty and a long list of politicians who do not have been good resource managers.

Any country that has economic indicators that put it in the world top 10 of the best economies, executes any economic measure and has an immediate effect or at least in the short term, results are expected and actions are taken based on those results that can be positive or not, then the same behavior is always expected from the rest of the countries in their economic measures.

So countries like Zimbabwe in the comparison of the macro-economic data that are used at a global level to standardize economies and determine the different positions based on these economic indices, is always at a disadvantage and a lot, that is, the mere fact of applying any economic measure its effect is hopefully months but it can take years and then the result is negative, which is the spiral in which this country finds itself, so then that a country like Zimbabwe adopt^assuming bitcoin is only a desperate measure by its leaders to have a culprit and then justify the bad result by saying that did bitcoin not work.

It is very sad that such terrible things happen in the world. The use of gold coins in Zimbabwe is probably a desperate move to somehow keep the situation with rising inflation, but whether it helps or not will be seen a little later. As for the proposal to use the US dollar, it is probably not the case that it can be a solution to the problem of high inflation in Zimbabwe, as the US dollar itself, like the US itself, is experiencing similar problems. Perhaps the use of cryptocurrencies could also help in solving this problem, but someone should deal with all this, only in this way can one see a real result in solving the problems associated with high inflation in many countries.

Dollar is still a fiat but dollar is definitely much stronger than some local currencies out there although inflations can't still be totally avoided. Some of us thinks' that btc can solve the issue about inflation but lately it's been proven that it wasn't true at all but it's still better if a country would adopt btc even if not as a legal tender as it can still bring some benefits and one of it is like you said about money transfer.

I am only not sure if investing in btc can help a country itself but it can surely help the people that will do that. The only question that I have in my head right now if is zimbabwe will allow btc because you said that this country is corrupt.

This might spring up high cases of insecurity in Zimbabwe. If Zimbabwe adopt gold which a valuable and revealing metal, people who have golds in their bags and pockets might have to keep them at home to avoid theft cases and roadside robbery if they wanted fighting inflation in real sense they would have gone for CDBC or opted for Bitcoin because it is cashless, digital, no paper format and a powerful tool for fighting inflation.

Can't blame them. Who would continue using a currency that literally has no value anyway? At least in gold they are still getting something in exchange for the goods and the services that they are trying to sell, and somehow they are guaranteed to have those gold exchanged into other currencies or other commodities that they can use while they grip to their reality. Even if they are getting something from using gold on their day to day transactions, you can't really remove the fact that you have to have a system in place that caters to these financial functions and their economy as a whole.

They need to understand that the most cost effective way to deal with the crisis is to allow the usage of foreign currecies. They can use either the US Dollar (USD) or the South African Rand (ZAR). How can anyone use 1 oz. gold coin for day to day trading and bill payment? And there are several other disadvantages. How can we make sure that the weight is exactly 1 oz? What happens if someone removes some portion of the metal? Gold is useful as a store of value, but it is not suitable to be used as a currency in physical form.

Tbh, gold is volatile too. And with thier history of dumping fiats that are not favorable or saving them from excessive price hikes, probably they may do same with these coins in the long run
 The introduction of these coins could also lead to high level of insecurity because there are the poor masses who may not be able to afford it and hence cases of thievery.
 I guess they could extend the usage of the dollar as against the earlier intended five years as it seems instead of just boosting their confidence, it is saving them a lot.

Am trying to see reason with this move towards gold coin or the speculated USD for an official legal tender to help the deteriorating economy situation of there country with local currency. I think there final move towards gold is just in a way, trying to avoid adopting another nation's national currency in the USD=US.

The aim here in gold coin adoption is to have some sort of standardised or reserved currency that the value stays same in the exchange market and almost all there monetary worth could be accounted for in the foreign exchange market as these values would be same everywhere. Coupled with the fact that, there CB don't have to print more notes as per fiat currencies.

What I can't exactly say is, if it's a good move buy I guess what ever helps could go at this point for them.

When zimbabwe gets to that stage. then it proves how severe the inflation rate in the country is.
and that is very concerning.

Because if the inflation rate is still at a moderate level, then steps such as using gold coins will definitely not be carried out. zimbabwe has come to the point where using gold coins is proving the value of its currency has really collapsed.

Meanwhile, if a country is affected by moderate to low inflation, the following things are usually done to overcome inflation:

1. Fiscal Policy
This fiscal policy is similar to that carried out by developing countries when facing inflation because this fiscal policy itself is related to the entry and exit of a budget in the government. This fiscal policy is carried out by
- increase tax rate
- reduce government spending,
- and make loans.

2. Monetary Policy
This policy is carried out by means of increasing or decreasing the amount of money in circulation. It is hoped that this step can maintain monetary stability with the aim of improving the welfare of the people in the country. another way is by carrying out operating policies on the open market. that can be done by controlling the money supply.

3. Non-fiscal and Non-monetary Policy
This policy is carried out in several ways, namely:
- Increase production hasil
- Facilitate the entry of imported goods
- Stabilize people's income
- Set the maximum price
- Supervision of goods distribution

But the steps above have been taken by Zimbabwe, but because of the severe inflation there, the step of using gold coins is a tough choice that they have to take. I myself wish the best for all countries that are currently experiencing an inflation crisis.

The biggest problem with Zimbabwe is the high levels of mismanagement and corruption in their government. The Mugabe government decided to challenge the "West" and the result was economic sanctions that crippled their economy even further.

At one stage.... their citizens opted to use "sweets" as substitute for small change, because the hyper inflation killed the value of their ZIM Dollars and people rather wanted "sweets" instead of a hand full of worthless fiat currency.  ::)

Bitcoin has also been used as a hedge against inflation, but the lack of Internet infrastructure and also stable electricity and 3rd world education system...has sabotaged it's success.

The Zimbabwean government continuously increased interest rates (200% interest rate) to counter inflation, but they did not get a positive result. They should have developed new production economy models instead of increasing interest rates. Interest only stopped production and money flow... Today, they are looking for a solution to the crisis by creating a gold-based currency. This attempt at a solution will create monetary contraction and cause other crises besides inflation. :(

From the look of the things, it seems only business people are only group with the capacity to buy these gold coins. Correctly said, couldn't agree more.

Noble idea, but for now you can not 100% trust the team and the process. Moreover, the timing of this move as fire fighting you might need a bit of time to see where it goes so as to give a clear judgement. In their perspective this is not to be used as a payment token but a store of value given rising inflation on daily basis.

One major disadvantage is that the coins can not be used as payment tokens which makes them very inferior in the eyes of many. The other aspects is that they are more like bonds usually issued by the state just to raise funds for for their activities.
On where they can lead to I guess nothing very significant can come out of these coins unless there is more education of it to the general public.

https://news.bitcoin.com/zimbabwe-central-bank-gold-coin-sales-to-commence-in-late-july/?s=09


Come 25th July, The sale of the gold coin's are expected to commence, where the buyer's can both make use of them local currency ( fiat ) and USD. Both locally and internationally.
The Gold coins have been named Mosi-Oa-Tunya ( The local language equivalent for the Victoria Falls ).