Zimbabwe prepares to launch gold-backed digital currency

Zimbabwe prepares to launch gold-backed digital currency
/ Al Jazeera via YouTube
By bne IntelliNews August 14, 2023

Zimbabwe is preparing to launch a central bank digital currency (CBDC), its latest effort to come up with a viable national currency and contain inflation, BeInCrypto reports.

It cited Reserve Bank of Zimbabwe (RBZ) governor John Mangudya on August 13 as saying the currency will be backed by gold bullion held by the apex bank.

By transitioning gold-backed digital tokens (GBDTs) from a pure store of value to a currency used for everyday transactions, BeInCrypto said, the RBZ is essentially proposing using the tokens as a CBDC.

The transactional form of Zimbabwe’s digital gold tokens would complement US dollars in domestic transactions, it added.

“The bank is at an advanced stage in the preparations for the eventual rolling out of GBDT [gold backed digital tokens] for transactional purposes in Phase II of the project under the code or name ZiG, which stands for Zimbabwe Gold,” BeInCrypto wrote.

In an effort to boost the local currency, the RBZ introduced physical gold coins in July 2022 and digital gold coins in May 2023. The instruments have helped mop up excess Zimbabwe dollars, strengthened it and limited demand for the greenback as a store of value.

By July 2023, the RBZ had, since May 2023, issued 325,02kg of GBDT valued at ZWD50.5bn (about $139mn) and $7,794.

Citing Mangudya, Sunday News reported on August 13 that a central bank consumer survey of 3,260 respondents established that 71.7% were willing to use a CBDC if the bank introduced it.

“It is in this evidence-based context that the bank proposes to take the road towards CBDC in measured stages as the result of the survey gives the bank sufficient impetus to move to the next stage,” Mangudya added while delivering a mid-term monetary policy statement on August 9.

The local currency was trading at 671 to the greenback on January 3, 2023 but had weakened to 4, 555 by August 11. Annual inflation was 101% in July from about 230% in January.

“The GBDT are envisaged to form the basis for the development of the country’s central bank digital currency (CBDC) since ZiG in its current form and design exhibits most of the characteristics of a CBDC,” said Mangudya.