CBDC Landscape Widens: Zimbabwe to bring Gold-backed Digital Currency

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The token is expected to be launched in the near future and will be pegged to te value of gold, with each unit of the currency representing a certain amount of the precious metal.

Zimbabwe’s Central Bank, the Reserve Bank of Zimbabwe (RBZ), has announced its plan to issue gold-backed digital currency taking a step into the CBDC space. The token is expected to be launched in the near future and will be pegged to te value of gold, with each unit of the currency representing a certain amount of the precious metal. The move is aimed at addressing the country’s economic challenges and providing alternative means of payment for citizens.

As announced by the Governer of RBZ, John Mangudya, the digital token will be minted in denominations of $1, $10, and $20. The tokens will be redeemable for physical gold and other currencies, including the US Dollar, British Pound, and the Euro.

hq od reserve bank of zimbabwe that is working on gold-backed digital currency
The RBZ in focusing on building a digital infrastructure that is more efficient and user-friendly.
Image Courtesy:Chronicle

Zimbabwe has faced long-standing economic challenges, including high inflation and a shortage of foreign currency. The local currency, Zimbabwean dollar, has seen significant decline in value which has effectively increased the use of th US Dollar and South African Sand. The introduction of a digital gold token is not only going be a instrument for payments, but also attract foreign investments by offering a secue and stable currency.

Additionally, a gold-backed digital currency could also help to promote financial inclusion in Zimbabwe. With the rise of mobile money and digital payment platforms, many Zimbabweans are now able to access financial services that were previously unavailable to them. A digital currency could provide a payment aid that is accessible to anyone with a mobile phone or internet connection.

Zimbabwe takes a lesson from the challenges faced by Nigeria’s eNaira. Image Courtesy: Channels

Zimbabwe takes inspiration from Nigeria’s experience with eNaira, as it looks to avoid the adoption challenges, slow processing times and limited acceptance that plagued Nigeria’s digital currency. The RBZ in focusing on building a digital infrastructure that is more efficient and user-friendly to tackle these issues. The Central Bank is also said to be working with financial institutions and other stakeholders to endure widespread adoption of the digital gold token. Although RBZ’s strategic spproach seems promising, it remains to be seen how successful the digital currency will be in tackling the affairs in Zimbabwe.

The Case for Gold-backed Cryptocurrencies

As cryptocurrency and the technology around it continues to advance and change the ways or interaction and business worldwide, there is a growing interest in digital currencies backed by tangible assets. Gold has always been considered a valuable commodity and has been used as a store of wealth for centuries. Gold-backed digital currencies are essentially cryptocurrencies that are backed by physical gold reserves.

The idea behind these currencies is to provide investors with the benefits of digital currencies, such as security, transparency, and ease of use, while also providing the stability and value of physical gold. These tokens can be bought and sold like any other cryptocurrency, and the value of the token is tied to the value of the underlying gold assets.

paxg is one of the most widely used and famous gold backed digital currency
PAXG is one the leading gold-caked cryptocurrencies with a market cap of $540,875,220. Image Courtesy:paxos

Gold-backed digital currencies are aguably even better than traditional gold investments. One of the main advantages is that they are more accessible to a wide range of investors. Traditional gold investments often require large amounts of capital and can be difficult to trade. With gold-backed digital currencies, investors can buy and sell small amounts of gold at any time, without the need for a broker or dealer.

China’s Push for Digital Yuan Adoption

The Chinese government has been ramping up its efforts to promote the adoption of its CBDC, the digital yuan, among the public. From public servants receiving digital yuan salaries to expanding its use in the Belt and Road Initiative, the Chinese government is making strides in the development and adoption of the digital currency.

yuan currency note and a replica of digital yuan in frame
Image Courtesy:IndustryWeek

Starting from May 2023, public servants in the city of Suzhou will receive their salaries in digital yuan. This pilot program will initially cover 20,000 public servants, including employees of the local government, state-owned enterprises, and public institutions. The digital yuan will be distriuted to employees’ digital wallets, which can be used to make purchases at participating merchants and transfer funds to other users, providing a tangible use case for the currency.

China is also looking to expand the use of its digital yuan in the Belt and Road Initiative, a global infrastructure and development project that aims to connect Asia, Europe, and Africa. The digital yuan could reportedly be used to settle cross-border transactions in the initiative. The use of digital yuan for foreign settlements is aimed at reducing China’s reliance on the US dollar and promote the internationalisation of the yuan.

Along with presenting a secure and efficient means of payment, a widespread adoption of the digital yuan could also help to reduce costs associated with cash handling and circulation, which can be particularly high in countries with large populations like China.

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