Zimbabwe Launches Gold-Based Digital Currency To Stabilize Local Currency

On April 25, it was reported that Persistence Gwanyanya, member of the Monetary Policy Committee of the Bank of Zimbabwe, said that Zimbabwe needed $100 million of gold to launch its proposed gold based digital currency to stabilize the local currency and boost demand. The Bank will rely on the gold reserve that has been accumulated to support this initiative and curb the fluctuations of the local currency. Innocent Matshe, Deputy Governor of the Central Bank of Zimbabwe, revealed that the Reserve Bank of Zimbabwe is finalizing a date for the launch of a digital currency supported by gold. He said, “This is a very simple concept, we tokenize gold, we own gold. Every time we issue a token, it has real gold support. We are still finalizing the details.” Matshe declined to comment on the value of gold that will be used to support digital currencies. (Bloomberg)

The Zimbabwe Central Bank’s digital currency plan requires $100 million in gold, and details such as dates are still being finalized

The Reserve Bank of Zimbabwe has announced its plans to launch a gold-based digital currency to stabilize the local currency and boost demand. According to Persistence Gwanyanya, a member of the Monetary Policy Committee of the Bank of Zimbabwe, the country needs $100 million worth of gold to launch this currency.

Why Gold-Based Digital Currency?

The Bank is relying on the gold reserve that has been accumulated to support this initiative and curb the fluctuations of the local currency. Innocent Matshe, Deputy Governor of the Central Bank of Zimbabwe, said the idea is pretty simple. The bank will tokenize gold and own gold. Every time the bank issues a token, it has real gold support. This is thought to eliminate the issues that come with fiat currencies, like constant inflation and fluctuation.

The Launch Date Is Still Under Discussion

The Reserve Bank of Zimbabwe is finalizing a date for the launch of the digital currency, which will be supported by gold. According to Innocent Matshe, they are still finalizing the details and declined to speculate on the value of gold that would be used to support this digital currency.

Digital Gold Is Going Mainstream

Digital gold is going mainstream due to its benefits over conventional gold. The gold-backed digital currency can enable instant and secure transfer of funds, eliminate transaction fees, and allow storage in digital wallets. Therefore, many investors and central banks are actively exploring the idea of launching digital currencies.

Top Benefits Of Gold-Based Digital Currency

Some of the benefits of gold-backed digital currency are:

1. Stability

As mentioned earlier, the price of gold is relatively stable compared to other assets. By backing its digital currency with gold reserves, Zimbabwe can avoid the fluctuations that come with fiat currencies.

2. Security

Digital currencies offer more security than physical currencies. They are more challenging to counterfeit, and the transactions are secure, traceable, and irreversible.

3. Fast Transactions

Gold-backed digital currency allows for quick, safe, and secure transactions, which are conducted without the need for intermediaries, enabling instant settlements and reducing transaction costs.

Potential Challenges

While the idea of gold-based digital currency might seem fascinating, Zimbabwe still faces several challenges. One of the challenges is the acceptance of the digital currency by users. Another one is regulating and monitoring the new currency’s usage.

Conclusion

Zimbabwe’s gold-backed digital currency promises to be an innovative solution to currency stabilization and boosting demand. As the world continues to embrace digital currency, this initiative may be the first of several to adopt the gold standard.

FAQs

1. What is a gold-based digital currency?
A gold-backed digital currency is a form of digital currency that is backed by gold reserves, usually owned by a central bank.
2. What are the benefits of a gold-based digital currency compared to fiat currencies?
Gold-based digital currencies are relatively stable, secure, and fast. They also eliminate transaction costs and reduce the risk of fraud.
3. What challenges does Zimbabwe face in launching its gold-based digital currency?
Zimbabwe’s gold-based digital currency is likely to face challenges regarding user acceptance and regulating the new currency’s usage.