The Reserve Bank of Zimbabwe introduced a gold-backed digital currency that will be fully backed by physical gold held by the Bank. This move might pave the way for gold-backed money.
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Since Zimbabwe declared independence from the former Republic of Rhodesia in 1980, the southern African country has been ravaged by inflation and overall economic turmoil. Over the past 40 years, the annual inflation rate has only touched single-digit territory twice: 1980 (7 percent) and 1988 (7 percent).
Excessive money printing, fiscal mismanagement, economic sanctions, and currency instability have been the root causes of its perpetual financial crisis, resulting in political and social upheaval.
In 2008, Zimbabwe was given the unfortunate record of the highest inflation rate in the world, touching 250 million percent. This forced then-President Robert Mugabe and his government to abandon the Zimbabwe dollar and begin relying on nine foreign currencies, particularly the U.S. dollar and the South African rand. In 2019, Harare introduced a new Zimbabwean currency, but it did not take long for the revival of hyperinflation, with the inflation rate surpassing 600 percent by March 2020.
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After numerous trials and errors on the monetary policy front, the Reserve Bank of Zimbabwe (RBZ) experimented with something old and something new: a gold-backed digital currency.
“Pursuant to the resolution of the Monetary Policy Committee (the MPC) on 28 March 2023 to complement the issuance of physical gold coins with gold-backed digital products, the Bank wishes to advise that it will be issuing gold-backed digital tokens with effect from 8 May 2023,” said RBZ Governor John Mangudya in a statement. “The gold-backed tokens will be fully backed by physical gold held by the Bank.”
Central bank officials say this money will be supported by 140 kilograms (4,900 ounces) of gold.
The two-phase implementation began with the RBNZ selling digital tokens to investors for a minimum price of $10 for individuals and $5,000 for businesses and other entities. The transition will then allow consumers to purchase the digital currency from banks and use the tokens to conduct “person-to-person and person-to-business transactions and settlements” by using “e-gold wallets or e-gold cards” held by these financial institutions. Consumers can also rely on virtual tokens to save their money.
The announcement came months after the government allowed gold coins to be used as legal tender, but the decision did not appeal to struggling families because they were too expensive.
The Reserve Bank of Zimbabwe has announced that Zimbabwe will launch a gold-backed digital currency, dumping the US dollar.