The Reserve Bank of Zimbabwe (RBZ) is set to introduce a digital currency backed by gold to be used as legal tender as part of efforts to stabilize the local currency.
Zimbabwe Gold-backed digital tokens to go live on May 8 2023.
Banks will create special wallets to hold the digital tokens.https://t.co/p4aalYbYPj pic.twitter.com/LQoEZJczJ0
— BitKE (@BitcoinKE) April 29, 2023
According to a local daily, officials at the reserve bank expect the gold tokens will be acquired by those holding small dollar amounts as an alternative to store value and hedge against exchange rate volatility.
Reserve Bank of Zimbabwe 🇿🇼 Governor, John Mangudya, holds a sample of a gold coin at the launch in Harare, Monday, July 25, 2022https://t.co/tPrEJUV3Gi pic.twitter.com/8clZelVKzP
— BitKE (@BitcoinKE) March 16, 2023
Zimbabwe’s currency is currently traded at a rate of 1,001 ZWL per $1 but it is commonly exchanged for 1,750 ZWL on the streets of Harare, the country’s capital, a Bloomberg analysis indicates. As of March 2023, the country’s annual consumer price inflation has dropped to a one-year low of 87.6%, down from 92% in February 2023.
77% of transactions in Zimbabwe 🇿🇼 have used U.S dollars in 2023 so far.https://t.co/4BwEBVO6ab pic.twitter.com/hF2vPRxCte
— BitKE (@BitcoinKE) April 30, 2023
The Reserve Bank Governor, John Mangudya, has stated that the parallel market’s exchange rate is expected to stabilize in the coming weeks following the payment of U.S. dollars to tobacco farmers. He explained that the current instability in the exchange rate has resulted from expectations of an increase in foreign currency supply due to the tobacco season.
“With the start of the tobacco marketing season, most of the funds have been going towards servicing tobacco contractor’s obligations. Now, the money will start flowing into the accounts of the growers themselves end of this month, that is when most of them will start receiving their US dollar portion,” Mangudya said.
The upcoming digital tokens are expected to complement the Mosi – a – Tunya gold coins released by the Reserve Bank of Zimbabwe in 2022 and have reportendly been successful in taming the country’s inflation. As previously reported by BitKE, gold coins have helped fight inflation from over 30% to 1% in just 6 months as of January 2023.
The bank is thinking of releasing more of the gold coins onto the market to tame the recent depreciation of the Zimbabwe dollar in the parallel market.
Between July 2022 and January 13, 2023, the Zimbabwean central bank sold 25,188 ‘Mosi-oa-Tunya’ gold coins valued at over $28 million ($20 billion in ZWD), with 84% of the purchases made by corporates and 16% by individuals.While the coins were initially targeting wealthier customers, lower denomination gold coins introduced in November 2022 ‘accounted for 38% of all sales, the bank said.
“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,” said Mangudya. “It means anyone with local currency would want to convert it into foreign currency.”
“We are addressing this demand for store of value by increasing the number of gold coins in the market so that we manage that demand. We shall also soon be introducing digital gold tokens to ensure that those with low amounts of local currency are able to purchase the gold units so that we leave no one and no place behind.”
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