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- 1 Zimbabwe’s government and central bank are now allowing citizens to make payments via a digital token which is backed by physical Gold.
- 2 The fractionalization in this plays a very important part as the daily payments are facilitated by making it as low as $10.
- 3 This need arose as a result of a steep decline in the value of Zimbabwe’s dollar and to give citizens an alternative investment avenue to maintain the value of their savings.
- 4 The central bank also announced that these tokens are tradable.
Introduction
Investors can now invest, save and transact in Gold as the Reserve Bank of Zimbabwe confirmed the issuance of a gold-backed digital currency, last week. It is so flexible and feasible that people can acquire gold tokens for as little as $10. These tokens will be issued this week and can be used for payments.
Gold-Backed Digital Coins
In order to expand the value-preserving instruments available in the economy, enhance the divisibility of the investment instruments and widen their access and usage by the public, Zimbabwe’s central bank announced using and issuing the gold-backed digital currency.
The scheme permits users to purchase digital tokens that are backed by physical gold from commercial banks, building societies and the People’s Own savings bank. Its user base can be anyone like individuals, financial institutions, corporates and other entities.
Making Gold Accessible
The main and most important part of this is the low-price access point. In 2022, Mosi-oa-Tunya gold coins were released but the minimum value that a user can have was US $2000 making it unfit for daily payments. While now, fractions of the currency can also be acquired, like the minimum value of the tokens acquired are now US $10.
All thanks to fractionalization, that made it possible to have a digital gold payment as small as US $10, which is rather a very small portion of gold.
Another interesting feature is the pricing model. It is based on the standard international gold price that is determined by the London Bullion Market Association. Users can get a 20% premium on the mid-bid-offer rate for those who want to buy or redeem the token, but funds are settled in local currency only.
Purpose
This is launched in reference to the exponential decline in the Zimbabwe dollar which dropped suddenly by more than half since the end of last year. The tokens have nothing to do with what’s happening on the ground.
citizens can utilize this new token as an alternative investment avenue to maintain the value of their savings and can use it for payments as well.
The government said that these gold tokens are tradable and capable of facilitating Person-to-person and Person-to-business transactions and settlements.
It is believed that this will allow central banks to maintain the token’s fixed convertibility and defend the country’s exchange rate.
But there arises a question of whether people will accept this mode of payment or not. Former retailers now accept local currency over any other form of currency.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
