The Reserve Bank of Zimbabwe (RBZ) is taking significant strides in the world of fintech by introducing a gold-backed digital currency that will act as a legal tender for transactions within the country.
This move is aimed at stabilizing the local currency and represents the first steps by the central bank towards using Zimbabwe’s gold reserves to anchor the Zimbabwe dollar.
Zimbabwe still dealing with money problems
The digital gold tokens, a form of digital money backed by gold held at the central bank, will enable those holding small amounts of Zimbabwe dollars to change their money for tokens, thereby preserving value and hedging against exchange rate volatility.
This development comes as the RBZ considers releasing more Mosi-oa-Tunya gold coins to mitigate the recent depreciation of the Zimbabwe dollar on the market.
RBZ Governor Dr. John Mangudya believes that the parallel market foreign currency exchange rate will stabilize when tobacco farmers receive their portion of United States dollar payments this week.
The launch of digital gold tokens is expected to supplement the Mosi-oa-Tunya gold coins by offering an alternative investment avenue for storing value and transacting.
“We are addressing this demand for a store of value by increasing the number of gold coins in the market so that we manage that demand.”
Dr. John Mangudya, RBZ governor.
As central banks worldwide develop their own digital currencies to boost financial inclusion, reduce payment fees, and make money smarter, Zimbabwe is joining the ranks of countries like Russia, which is working with allied nations such as Iran and China to create systems for cross-border settlements in gold-backed digital currencies.
In other fintech news, the Federal Reserve denies that FedNow is a central bank digital currency (CBDC) amidst growing anti-CBDC sentiment. Meanwhile, the Reserve Bank of Australia is outlining retail CBDC pilot projects, testing 14 use cases and working with major lenders and other firms.
According to our overview, over 20 countries will take significant steps toward piloting a CBDC. Australia, Thailand, Brazil, India, South Korea, and Russia are predicted to join or continue pilot testing, and the European Central Bank also intends to kick off with trials this year.
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