Zimbabwe’s central bank will launch a gold-backed digital currency, the national newspaper, The Sunday Mail reports.
And although technically the tokens could be considered a form of central bank digital currency (CBDC), they are better thought of as digital gold.
Digital Gold as a Hedge Against Inflation
The new gold-backed tokens are being issued in a country that has a troubling history with inflation.
Ever since Zimbabwe suffered from a major crisis of hyperinflation in 2008, the country has struggled to bring rates down. In the past year, annual inflation has rarely dipped below 90%. And the Zimbabwe dollar has fallen sharply against major currencies.
Facing such an inflationary environment, residents in the country will be able exchange Zimbabwe dollars for the digital gold as a way to hedge against volatile exchange rates. The gold itself will remain in the custody of the issuing authority.
RBZ Governor Dr. Mangudya told the paper that the central bank is also considering issuing more physical gold coins. In a bid to tame inflation by using its gold reserves to draw Zimbabwe dollars out of circulation, the central bank will issue the precious metal in both physical and tokenized form.
“What we have noticed is that demand for foreign currency, apart from being driven by the need to import goods and services in Zimbabwe, is also viewed as a store of value,” he said.
Of course, there have been many previous attempts to tokenize physical gold assets over the years.
For inspiration, the RBZ can look to existing cryptocurrencies like Gold Coin (GLC) and Meld Gold by Algorand (MCAU). Minted by well-known players in the crypto space, these tokens offer an alternative way for people to invest in gold. And without without having to physically hold it themselves.
In instances of gold-backed currency, blockchain technology providers often partner with specialists in precious metals trading and safekeeping.
For example, the precious metals refinery SEMPSA JP has partnered with Aurus. Through the collaboration, the company offers gold- and silver-backed tokens to bullion dealers.
As well as delegating responsibility for storage to professionals, tokenized gold also allows people to purchase smaller weights easily. Because no physical metal has to be processed when digital assets exchange hands, gold-backed crypto can lower barriers for entry to the investment class.
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content.
Be the first to comment