A central bank digital currency (MNBC) backed by gold rather than fiat money? This is the project of the Central Bank of Zimbabwe, according to an announcement yesterday. This is further proof of the growing importance of digital assets for central banks around the world.
A gold-based digital currency for Zimbabwe
The southern African country, which has a population of 14 million, uses a local currency based on the dollar. Formerly called the Zimbabwean dollar, since 2019 it has lost its peg to the USD and turned into the “RTGS dollar”. But that was not enough to stop inflation, and in fact, many local transactions are made in US dollars.
The Central Bank of Zimbabwe is therefore counting on a new digital asset in particular to raise the bar. This one will be backed by the country’s gold reserves. Zimbabwe’s monetary authorities view it as a reserve asset. Residents will be able to exchange their RTGS dollars for this digital asset, in order to protect themselves against volatility.
This is not the first time that Zimbabwe has used gold to try to support its monetary system. In 2022, the country had introduced gold coins to its economy, dubbed mosia-oa-tunya. 2,000 of them had been distributed to commercial banks. The country’s central bank intends to distribute them again, in a context of continuing inflation.
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Zimbabweans are turning to alternative assets
The governor of the Central Bank of Zimbabwe, John Mangudya, confirmed to our colleagues from the local media Sunday Mail that the people of Zimbabwe are arming themselves with foreign assets:
“What we have noticed is that the demand for foreign currency, beyond coming from a need to import goods and services into Zimbabwe, is also based on a vision of these assets as stores of value.»
Noting that “anyone with local currencymight want to convert it to foreign currency. Zimbabwe’s strategy is therefore based on two gold-based assets : on the one hand the physical coins, and on the other the digital currencies:
“We are responding to this demand for a store of value by increasing the number of gold coins on the market. […] We will also soon be introducing digital gold tokens, to ensure that those who hold limited amounts of local currency can purchase gold-based assets.»
This development is typical of what can be seen in economies experiencing high inflation in recent years. For the moment, we do not know whether these digital gold tokens will be blockchain-based. In any case, this shows that central banks are forced to find new strategies to deal with an unprecedented economic context.
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Source: Sunday Mail
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