Gate.io Blog Zimbabwe Readies for Launch of Gold Backed Digital Currency

Zimbabwe Readies for Launch of Gold Backed Digital Currency

29 August 15:59

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Zimbabwe is set to launch its gold backed local digital tokens.

ZiG will become a legal tender and a store of value.

Individuals and institutions will be able to buy, hold and trade GBDTs.

Keywords: Zimbabwe gold-backed digital currency, Reserve Bank of Zimbabwe, Zimbabwean dollars, gold-backed virtual token, gold-backed local digital tokens, Crypto in Zimbabwe
## Introduction 
The number of countries that are introducing central bank digital currencies (CBDCs) is increasing. In some cases, [the CBDCs](https://www.gate.io/learn/articles/what-are-central-bank-digital-currencies/363 "the CBDCs") are backed by the local currencies, the United States dollar or precious minerals like gold.

Zimbabwe is one of the latest countries to introduce its digital currency. In this article we cover the potential impact of Zimbabwe’s gold backed digital token (GBDT) on its economy. 
## Zimbabwe Launches its Gold Backed Digital Token (GBDT)
On 9 August the Reserve Bank of Zimbabwe (RBZ) announced that it has launched its gold backed digital currency. As the de_script_ion suggests, Zimbabwe’s GBDT, a form of electronic money, is backed by gold bullion which the central bank will hold.

During the first phase of the project the GBDT investors can hold their tokens and exchange them. However, in the next stage they will be able to trade and use them to make payments for goods and services in the country.

[In a public statement](https://www.bing.com/ck/a?!&&p=dabe4658507258edJmltdHM9MTY5MzA5NDQwMCZpZ3VpZD0yYzdlZjMzNy1kMWUxLTYwNTMtMjYyOC1lMDE4ZDBjMjYxNTMmaW5zaWQ9NTIwNg&ptn=3&hsh=3&fclid=2c7ef337-d1e1-6053-2628-e018d0c26153&psq=%e2%80%9cHolders+of+physical+gold+coins%2c+at+their+discretion%2c+will+be+able+to+exchange+or+convert%2c+through+the+banking+system%e2%80%a6+into+gold-backed+digital+tokens.%e2%80%9d&u=a1aHR0cHM6Ly93d3cuemltYmFid2VzaXR1YXRpb24uY29tL25ld3MvemltYmFid2VzLW5ldy1nb2xkLWJhY2tlZC1kaWdpdGFsLWN1cnJlbmN5LWFsbC15b3UtbmVlZC10by1rbm93Lw&ntb=1 "In a public statement"), the central bank said, **“Holders of physical gold coins, at their discretion, will be able to exchange or convert, through the banking system… into gold-backed digital tokens.”**

Currently, Zimbabwe uses a multicurrency system where the citizens can make payments with different foreign currencies including the United States dollar, the British pound, the Botswana Pula and the South African Rand. However, the country has its own local currency, the Zimbabwean dollar.

Read also: [How Africans Are Benefiting From Crypto](https://www.gate.io/blog_detail/1389/how-africans-are-benefiting-from-crypto "How Africans Are Benefiting From Crypto")

Sadly, the Zimbabwe dollar is a “hot potato”, meaning that when people get it they often exchange it for popular foreign currencies like the United States dollar and the South African Rand. The reason why they convert the local currency to forex is that there is high inflation in the country.

Meanwhile, the government has been inviting both individuals and institutions to invest in the GBDT. They can buy it using Zimbabwean dollars or any major foreign currency circulating in the country.

In May, the RBZ introduced physical gold coins that helped to reduce the supply of the Zimbabwe dollar and enabled it to appreciate against major currencies like the US dollar. By July, the southern African country had created GBDT backed by a total of 325,02 kg of gold and valued at ZWD50.5bn worth about $139 million.

Read also: [Countries that Lead in Blockchain Adoption](https://www.gate.io/blog_detail/2563 "Countries that Lead in Blockchain Adoption")

With this development, Zimbabwe joins several other African countries that have introduced their digital currencies including Ghana and Nigeria. Nevertheless, there are many other countries on the continent with plans to launch their CBDCs.

Discover also: [Top tokenized-gold Crypto Coins & Tokens by Market Cap](https://www.gate.io/price/view/tokenized-gold "Top tokenized-gold Crypto Coins & Tokens by Market Cap")
## What are Gold Backed Digital Tokens?  
A gold backed digital currency has a value which is pegged to a certain quantity of gold. Therefore, its value tracks the price of the gold it is pegged against. In Zimbabwe the gold-backed local digital tokens will be used alongside Zimbabwean dollars and other foreign currencies used as legal tender.

Basically, the Zimbabwean government keeps a certain quantity of gold that backs its virtual tokens. According to its state media, by April [the country had 350 kgs of gold in reserves](https://www.bloomberg.com/news/articles/2023-04-24/zimbabwe-s-digital-currency-plan-needs-100-million-of-gold#:~:text=State%2Downed%20media%20reported%20earlier,to%2040%20tons%20this%20year. "the country had 350 kgs of gold in reserves"), valued at around $22.80 million. However, it intends to own GBDTs backed by gold reserves worth $100 million.
## Reasons Why Zimbabwe has Introduced Gold Backed Local Digital Tokens
The main purpose of the gold backed local digital tokens is to use them as legal tender, for person-to-business and peer-to-peer transactions. Also, since it is backed by gold it will become a store of value and will become its CBDC in the future.

D[r Magudya, the RBZ governor said](https://miningzimbabwe.com/zim-set-to-introduce-gold-backed-digital-tokens/ "r Magudya, the RBZ governor said"), “The GBDTs are envisaged to form the basis of the country’s central bank digital currency (CBDC) since ZiG in its current form and design exhibits most of the characteristics of a CBDC.”

He added, **“The Bank is at an advanced stage in the preparations for the eventual rolling out of GBDT for transactional purposes in Phase II of the project under the code or name ZiG, which stands for Zimbabwe Gold.”**

By introducing the gold backed virtual token the Zimbabwean government aims at [taming inflation](https://www.sundaymail.co.zw/rbz-introduces-gold-backed-digital-currency "taming inflation") that has been one of its perennial economic problems. The country’s highest level of inflation was recorded in 2008 when [it reached 79,600,000,000%](https://www.cnbc.com/2011/02/14/The-Worst-Hyperinflation-Situations-of-All-Time.html "it reached 79,600,000,000%") per month. In November 2022 Zimbabwe’s [consumer price index was 107%](https://www.rbz.co.zw/index.php/research/markets/inflation/29-inflation/1134-consumer-price-index-september-2022 "consumer price index was 107%") while its [inflation rate was 175%](https://www.bloomberg.com/news/articles/2023-06-26/zimbabwe-inflation-back-at-three-digits-after-currency-crashes "inflation rate was 175%") in June this year.  
## The Effectiveness of ZiG
Some analysts believe that the Zimbabwe gold-backed digital currency ( Zimbabwe Gold) may have short term benefits as it is likely to act as a store of value as well as an investment asset.

However, for it to become effective in controlling inflation it should be accompanied by sound macroeconomic policies. For example, the country needs to enforce a tight monetary policy that includes raising interest rates and increasing banks’ reserve requirements. It should also keep an expansionary fiscal policy.

[According to Prosper Chitambara](https://finance.yahoo.com/news/zimbabwes-gold-backed-digital-token-074638346.html "According to Prosper Chitambara"), an economist, Zimbabwe’s solution to the problem of inflation is “to control the money supply growth,” not the introduction of the GBDTs.
## Crypto in Zimbabwe
Although people can trade and use cryptocurrencies in Zimbabwe, they are not officially accepted as a means of payment or investment assets. The government’s position is that it has not allowed individuals or institutions to use cryptocurrencies or to establish crypto businesses.

It has made it clear that cryptocurrencies are not legal tender in the country. In a press statement dated 20 December 2017, [the government said](https://www.rbz.co.zw/documents/BLSS/BANK%20SUPERVISION/Press%20Releases%20&%20Speeches/2018/PRESS%20STATEMENT%20ON%20WARNING%20AGAINST%20TRADING%20IN%20CRYPTOCURRENCIES%20%20%20-%2011%20May%202019.pdf "the government said"), **“the Reserve Bank wishes to reiterate that virtual currencies or cryptocurrencies such as <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> and <a href="/price/litecoin-ltc" target="_blank" class="blog_inner_link">Litecoin</a> do not have legal tender status as they are neither issued by the Reserve Bank nor guaranteed by the government.”**

It added, “The Reserve Bank of Zimbabwe has not authorised or licensed any person or entity or exchange for the issuance, sale, purchase, exchange or investment in any virtual currencies/coins/tokens in Zimbabwe. Exchanges such as Bitfinance (Private) Limited (Golix) and Styx24 are not licensed or regulated by the Reserve Bank.”

Finally, the law does not protect individuals who trade cryptocurrencies or other digital assets. To this effect the [government stated](https://www.rbz.co.zw/documents/BLSS/BANK%20SUPERVISION/Press%20Releases%20&%20Speeches/2018/PRESS%20STATEMENT%20ON%20WARNING%20AGAINST%20TRADING%20IN%20CRYPTOCURRENCIES%20%20%20-%2011%20May%202019.pdf "government stated"), “For the avoidance of doubt, dealers and investors in any kind of cryptocurrency in Zimbabwe are not protected by law. Virtual currencies are traded in exchange platforms that are unregulated.” 
## Conclusion 
Zimbabwe is ready to launch its gold-backed digital token called ZiG which will become a legal tender and a store of value. Individuals and institutions can buy and hold it. In the near future, they will be able to trade and use it to make payments. The government of Zimbabwe does not allow investment in cryptocurrencies nor does it permit crypto businesses. 
## FAQs about Crypto in Zimbabwe
### Is crypto allowed in Zimbabwe?
The government of Zimbabwe does not allow the issuance, purchase, sell and trading of cryptocurrencies in the country. Since there are no laws that govern crypto activities, people trade cryptocurrency at their risk. 
### What is gold-backed Zimbabwe cryptocurrency?
Gold backed Zimbabwe cryptocurrency is a digital currency that is backed by gold. Currently, people can buy and hold the gold-backed virtual token called ZiG. However, in the future they will be able to use it to make payments for goods and services. 
### What is the Zimbabwe digital currency? 
Zimbabwe digital currency is electronic money which is a legal tender and a store of value. The citizens will use it to buy goods and services as well as investing in it since it is a store of value. 
### Did Zimbabwe defy IMF to sell $40 million worth of gold backed digital tokens? 
Zimbabwe did not defy the IMF when it sold its gold backed digital tokens. In fact, the IMF did not stop Zimbabwe from selling its digital tokens. It simply warned the country against selling the digital currency but to liberalize its exchange markets instead.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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Introduction

Zimbabwe Launches its Gold Backed Digital Token _GBDT_

What are Gold Backed Digital Tokens?

Reasons

The Effectiveness of ZiG

Crypto in Zimbabwe

Conclusion

FAQs about Crypto in Zimbabwe

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Zimbabwe Readies for Launch of Gold Backed Digital Currency

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