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(Kitco News) -
The Reserve Bank of Zimbabwe (RBZ) has set the purchase and exchange rates for the first issuance of their new gold-backed digital currency in the latest effort to mitigate the country’s runaway inflation which has seen their currency lose over 37% against the U.S. dollar on the official market in 2023.
The RBZ announced on May 4 that the new GoldBacked Digital Tokens will go on sale starting Monday, May 8, and purchases can be made for a minimum of USD $10 for individuals and USD $5,000 for financial institutions, corporations and other entities. The initial issuance will close on Wednesday, May 10, and will have a vesting period of 180 days.
The purpose of the new tokens is to “provide investors with a platform to save, invest and transact in gold.” The RBZ said that the tokens will be tradable and acceptable as collateral, and settlement will be done in either local or foreign currency.
According to the RBZ prospectus, the digital tokens are being issued “to expand the value-preserving instruments available in the economy, enhance divisibility of the investment instruments and widen their access and usage by the public.” The tokens will be available for sale through the country’s banks, who will create “dedicated or specific accounts for the holding of the goldbacked digital tokens.”
Citizens will be able to use the tokens, held in either e-gold wallets or e-gold cards, to conduct “Person-to-Person (P2P) and Person-to-Business (P2B) transactions and settlement,” and the gold-backed digital tokens are intended for use “both as a means of payment and a store of value.”
The RBZ said that the pricing will be based on the international gold price “as determined by the London Bullion Market Association (LBMA) PM fix.” Citizens purchasing the tokens with Zimbabwean dollars or physical gold coins will pay a 20% margin above the willing-buyer willing-seller interbank mid-rate.
Zimbabwe began issuing physical gold coins in July of 2022 to fight inflation and provide an alternative to the U.S. dollar, which is also legal tender in the country but is in short supply.
The new gold-backed tokens will be redeemable in the same way as the existing physical gold coins, and holders of physical gold coins “will be able to exchange or convert, through the banking system, the physical gold coins into gold-backed digital tokens.”
According to a Bloomberg report, Zimbabwe will support the gold-backed token issuance with $100 million worth of their existing gold reserves.
“Any amount around or less than $100 million will be able to deal with our challenge in a big way,” said Persistence Gwanyanya, a member of the central bank’s monetary policy committee. “We expect the central bank to bring a respectable quantity that can stabilize the Zimbabwe dollar and boost demand.”
The RBZ has been building up its gold reserves since the government introduced a new policy last year that forces the country’s miners to pay part of their royalties in cash and precious metals.
