The central bank of Zimbabwe introduced this gold-backed digital currency to combat the volatility of its national currency.
In a notice on Thursday, May 4, the Reserve Bank of Zimbabwe (RBZ) invited financial institutions and individuals to subscribe to its upcoming gold-backed digital currency. As per the initial plans, the gold-backed digital tokens will be available to investors starting May 8.
The central bank also plans to sell these tokens at a minimum price of $10 for individuals and $5,000 for financial institutions and corporates. As per the Reserve Bank of Zimbabwe, this digital currency will be available in the USD and local currency. However, the local currency will have a 20% margin higher than the willing-buyer willing-seller interbank mid-rate.
For the past few years, Zimbabwe’s economy has been quite under stress amid the solid devaluation of its national currency. During the month of March, Zimbabwe reported inflation of 87.6% after hitting a high of 285% in 2022. As a result, its national currency has remained extremely volatile. Last month in April, RBZ stated that the gold-backed tokens will help to combat the volatility of its national currency.
Two Phases of Issuance and Usage of Gold-Backed Digital Tokens
The central bank of Zimbabwe said that it will split the issuance and usage of the gold-backed digital currency into two phases. During the first phase, tokens will be issued for investment purposes and will be available for sale through banks. These tokens will be held in digital wallets or cards and will be available in person-to-person as well as person-to-business transactions.
The central bank said:
“Holders of physical gold coins, at their discretion, will be able to exchange or convert, through the banking system, the physical gold coins into gold-backed digital tokens”.
As per the latest Bloomberg report, the introduction of digital tokens is the latest move by the South African nation in supporting its local currency, which has seen a 37% devaluation against the US Dollar since the beginning of 2023.
As per the Bloomberg report, the Zimbabwean dollar is quoted at 1,001 against the US Dollar. However, it sells 1,750 on the streets of Harare, the capital city.
For the gold-backed digital currency, the Monetary Policy Committee approved the plan in March, eight months after the country introduced gold coins as a store of value.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.