Zimbabwe is planning to launch a gold-backed digital currency, according to a story in the state-run Sunday Mail citing John Mangudya, the governor of the country’s central bank.
According to the journal, the gold-backed tokens will operate as hedges against continuous currency instability and as a more effective store of value than the Zimbabwe dollar.
The monetary policy committee endorsed the plan for a gold-backed digital currency last month. The country’s Reserve Bank has previously issued gold coins as alternative legal tender.
Gold is seen as an extra layer of protection during economic turmoil and a hedge against inflation, which in Zimbabwe reached 230% in February.
The central bank intends to create additional “Mosi-oa-tunya” gold coins as well as digital tokens, with the hope that both currencies would be more dependable repositories of value than the fragile Zimbabwe dollar.
According to Innocent Matshe, the Reserve Bank of Zimbabwe’s deputy governor, the central bank is finalising a date for the launch of the gold-backed digital currency.
“What we have noticed is that demand for foreign currency, apart from being driven by the need to import goods and services in Zimbabwe, is also viewed as a store of value,” RBZ governor Mangudya told the Sunday Mail.
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Zimbabwe needs $100 million of gold to kick-start its plan
“We are addressing this demand for a store of value by increasing the number of gold coins in the market so that we can manage that demand.” We will also be launching digital gold tokens shortly to guarantee that individuals with limited local money may acquire gold units, ensuring that no one and no area is left behind,” he said.
However, Bloomberg reported on April 24 that Zimbabwe needs $100 million in gold to launch its planned bullion-backed digital currency as the southern African country tries again to stabilise its faltering dollar.
According to Persistence Gwanyanya, a member of the central bank’s monetary policy committee, the central bank would depend on gold reserves that it has been building to support the programme and reduce the volatility of the local currency.
“Any amount around or less than $100 million will be able to deal with our challenge in a big way,” Gwanyanya said by phone from Harare on Monday. “We expect the central bank to bring a respectable quantity that can stabilize the Zimbabwe dollar and boost demand.”
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The country had 350 kilograms of gold in reserves.
Since the US dollar is the de facto currency of trade in Zimbabwe, the country has been fighting a losing battle to keep its currency stable. With the implementation of a regulation last year that mandates miners pay a portion of royalties in cash and metal, the central bank has been accumulating gold reserves and has begun to acquire other valuable minerals as well. It’s hoping that the proceeds will help it pull off its current plan.
Earlier this month, state-run media quoted central bank governor John Mangudya as saying that Zimbabwe has 350 kilogrammes (12,346 ounces) of gold in reserves.
Zimbabwe aims to raise annual gold output by 14 percent, to 40 tonnes. Data released by Fidelity Gold Refineries, the only refinery in the country, shows that the country earned $377 million from gold output in the first quarter, down from $463 million in the same period a year earlier.
“It’s a concept which is pretty straightforward, we tokenize the gold, we have the gold,” said Innocent Matshe, deputy governor of the central bank, over the phone. When we mint coins, we back them with actual gold. The specifics are still being ironed out, but many nations are curious about our plan’s origins.
When asked about the price of gold, which would be used to underpin digital money, Matshe declined to elaborate.
