Following its positive response from investors, which the Reserve Bank of Zimbabwe (RBZ) praised as “commendable” in a recent report, the Gold-Backed Digital Token (GBDT) will soon be made available for retail use, the Reserve Bank of Zimbabwe (RBZ) has said.
On Wednesday, August 9, Governor John Mangudya of the RBZ said that work are underway to give the GBDTs the status of a medium of transactions at the release of the Mid-Term Monetary Policy Statement (MPS).
Mangudya claims that as of right now, the GBDT “shall be scaled up to be used for transactional purposes by the public.”
The Bank is far along in its planning for the ultimate implementation of GBDT for transactional purposes in Phase II of the project under the code or term ZiG, which stands for Zimbabwe Gold.
“It is anticipated that the GBDT will complement the use of the US dollar in domestic transactions during the transactional phase,” he stated.
The governor of RBZ also disclosed plans for national awareness efforts to inform the populace about the advantages of GBDT.
Zimbabwe Gold closely resembles the features of the central bank’s digital currency (CBDC), hence this digital instrument will serve as its base.
However, since gold backs the GBDTs, the MPS report emphasized the ongoing significance of gold coins as an instrument for monetary policy. By July 14, 2023, it has absorbed more than ZW$35 billion from 36,059 coins.
After the 180-day vesting period, the first maturity occurred on January 25, 2023. Only 769 gold coins, or 2% of all sales, have been redeemed, demonstrating the gold coins’ value-retention function.
Gold-Backed Digital Tokens (GBDTs) are being introduced as Zimbabwe’s solution to inflation.
The Bank introduced Gold-Backed Digital Tokens (GBDT) on May 12, 2023, to supplement sales of actual gold coins, improve the divisibility of investment instruments, and increase public accessibility.
The Mid-term Financial Report states that as of July 21st, the Bank has carried out 11 GBDT issuances and received 590 requests for tokens valued ZW$50.50 billion ($7,794.87). As a result, the Bank printed 325.02 kg of gold, or 325,024,524 milligrams.
These digital tokenized coins seek to support the local currency and provide a different investment option from the custom of chasing US dollars on the black market.
The tokens will act as a means of exchange for both people and companies, stabilizing the value of the Zimbabwean dollar and tackling the inflation problem.
There is no need to be concerned about the implementation of the GBDTs given Zimbabwe’s track record of properly controlling inflation.
Zimbabwe had a startling 175.8% inflation rate in June as a result of the adoption of a new bank benchmark and a fall in the value of the currency. The RBZ simultaneously established an interest rate of 150%.
Inflation was reduced through government and bank initiatives such exchange rate liberalization, taking on the bank’s foreign obligations, and requiring local currency payments for customs and taxes. By improving the exchange rate, these efforts reduced monthly inflation from its high in June to -15.3% in July 2023.
Similar to how yearly inflation drastically decreased from 175.8% in June 2023 to 101.3% in July 2023. As the results of these steps become apparent, the favorable trend will continue, thereby lowering the risk of using GBDTs for local transactions.