Zimbabwe Launches Gold-Backed Digital Currency To Replace US Dollar

The Reserver Bank of Zimbabwe's move is also expected to enhance the divisibility of the investment instruments.

The minimum expenditure for people to buy digital tokens will be $10 in an individual capacity. ( Image Source :Getty )

Zimbabwe has launched gold-backed local digital tokens today in order to reduce reliance and dependence on the US dollar. In a press release, the Reserve Bank of Zimbabwe (RBZ) announced that the gold-backed tokens will be fully backed by physical gold held by the Bank. Last month on April 28, RBZ governor John P Mangudya said people can use the currency to carry out peer-to-peer payments and transactions. The government said the issuance of gold-backed digital tokens is aimed at expanding the value-preserving instruments available in the economy. 

The move is also expected to enhance the divisibility of the investment instruments and widen their access and usage by the public, said the official release.

Meanwhile, international gold prices decided by the London Bullion Market Association will dictate the local pricing of the tokens to be circulated and used in Zimbabwe.

Gold-Backed Token Will Be Used In Two Phases

Mangudya said the government will issue the digital tokens for alternative usages to the US dollar in two phases, starting Monday.

First Phase

Mangudya said that the tokens will be issued for investment purposes with a vesting period of 180 days and redeemable in the same way as the existing physical gold coins. He also said that the tokens will be made available for sale in both foreign currency and the Zimbabwe dollar with the help of banks.

Mangudya said, "Banks will create dedicated or specific accounts for the holding of the gold-backed digital tokens (e-gold wallets or e-gold cards)."

He reiterated that holders of physical gold coins, at their discretion, will be able to exchange or convert the physical gold coins into gold-backed digital tokens. However, this will be done only through the banking system.

Phase Two Will Ensure Person-to-Person (P2P) Transactions 

Mangudya said, "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-toBusiness (P2B) transactions and settlements." This means that the gold-backed digital tokens will be used both as a means of payment and a store of value.

The minimum expenditure for people to buy digital tokens will be $10 in an individual capacity, while the amount will be $5,000 for financial institutions, corporates and other organisations.

Eventually, the bank has also advised that the pricing of the gold-backed digital tokens in foreign currency shall remain the same as the pricing model of the physical gold coins as per the guidance of the international gold price as determined by the London Bullion Market Association (LBMA) PM fix.

Meanwhile, all payments for the gold-backed digital tokens or physical gold coins in the Zimbabwe dollar will continue to remain at the current 20 per cent margin above the willing-buyer willing-seller interbank mid-rate.

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