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 sign up for its upcoming gold-backed digital currency. According to initial plans, the gold-backed digital token will be available to investors from May 8.
The central bank also plans to sell these tokens at a minimum price of $10 to individuals and $5,000 to financial institutions and companies. According to the Reserve Bank of Zimbabwe, this digital currency will be available in US dollars and local currency. However, the domestic currency will have a 20% higher margin than the average willing-to-buy interbank willing-to-sell average rate.
Over the past few years, Zimbabwe’s economy has been under severe stress amid the strong depreciation of its national currency. During the month of March, Zimbabwe reported inflation of 87.6% after reaching 285% in 2022. As a result, its national currency has remained very volatile. Last month in April, RBZ Bank stated that gold-backed tokens would help combat the volatility of its national currency.
Two phases for the issuance and use of gold-backed digital tokens
Zimbabwe’s central bank said it would divide the issuance and use of the gold-backed digital currency into two phases. During the first phase, the 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 for personal transactions as well as transactions between individuals.
central bank He said:
“Holders of physical gold coins will be able, at their discretion, to exchange or convert physical gold coins into gold-backed digital currencies through the banking system.”
According to the latest Bloomberg a reportThe introduction of digital tokens is the latest move by the South African country to support its local currency, which has seen a 37% decline against the US dollar since the start of 2023.
According to a Bloomberg report, the Zimbabwean dollar was quoted at 1,001 to the US dollar. However, 1,750 sells on the streets of the capital, Harare.
For a 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.
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Bhushan is a financial technology enthusiast with a good knack for understanding financial markets. His interest in economics and finance has turned his attention towards the new emerging Blockchain technology and Cryptocurrency markets. He is persistent in the learning process and keeps himself motivated by sharing the knowledge gained. In his spare time he reads fantasy and thriller novels and occasionally explores his culinary skills.
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