The Reserve Bank of Zimbabwe (RBZ) recently announced that it will begin issuing gold-backed digital tokens on May 8, 2023. The tokens, backed by gold held at the RBZ, will serve as a means of payment and a store of value. The RBZ explained that the issuance of the tokens is aimed at expanding the value-preserving instruments available in Zimbabwe’s economy, as well as to enhance divisibility and increase access and usage by the public.
The gold-backed digital tokens will be issued in two phases. In the first phase, the tokens will be issued for investment purposes, and they will have a vesting period of 180 days. The tokens will be redeemable in the same way as physical gold coins. Prospective buyers will be able to acquire digital tokens using local or foreign currency. The RBZ also suggested that current holders of the Mosi-oa-Tunya gold coins will be able to acquire the digital coins using the local banking system.
In the second phase, residents with digital tokens held in e-wallets or cards will be able to use such funds to settle transactions. The gold-backed digital tokens held in either e-gold wallets or e-gold cards will be tradable and capable of facilitating Person-to-Person (P2P) and Person-to-Business (P2B) transactions and settlements.
Zimbabwe has been facing economic challenges, including currency depreciation and a shortage of foreign currency. The RBZ governor, John Mangudya, has previously stated that the issuance of the gold-backed digital currency is meant to fight local currency depreciation. He also hopes that the digital currency will help reduce demand for the US dollar, which has long been preferred by Zimbabweans over the local currency.
The issuance of gold-backed digital tokens is not without concerns, however. Zimbabwe’s main opposition party spokesperson, Fadzayi Mahere, issued a warning that the RBZ’s gold-backed digital currency initiative could be illegal. Some observers have suggested that the digital currency’s integration with the country’s existing financial system could pose challenges.
Zimbabwe’s issuance of gold-backed digital tokens mirrors a global trend towards central bank digital currencies (CBDCs). This trend is being driven by a range of factors, including the need for faster and more efficient payment systems, the potential for financial inclusion, and the potential to reduce the risk of fraud and money laundering. In fact, some central banks, such as China’s, are much farther along in their CBDC development and have already started testing their digital currencies.
In conclusion, the issuance of gold-backed digital tokens in Zimbabwe represents a new development in the country’s efforts to address its economic challenges. While there are concerns around the legality of the initiative and its integration with the country’s existing financial system, it is clear that Zimbabwe’s central bank is taking steps towards a more digital future. Moreover, the trend towards CBDCs is a global one that is here to stay, so it will be interesting to see where Zimbabwe’s initiative leads and how it is received by the public.