Zimbabwe mulls retail gold-backed digital tokens following initial successes

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The Reserve Bank of Zimbabwe (RBZ) may be rolling out a retail version of its gold-backed digital token (GBDT) as it moves closer toward a central bank digital currency (CBDC).

In its mid-term monetary policy statement, the central bank said GBDT’s successes with investors are a key reason for its decision to explore a wide-scale use of the service.

Introduced in April, the GBDT was launched as a legal tender in Zimbabwe, designed to offer Zimbabweans a way out of skyrocketing inflation. With inflation soaring above 100%, RBZ Governor John Mangudya is forging ahead with his plan to “leave no one and no place behind.”

The GBDT “shall be scaled up to be used for transactional purposes by the public,” the statement read. “The Bank is at an advanced stage in preparations for the rolling out of GBDT for transactional purposes in Phase II of the project.”

Per the report, the tokens will complement the demand for the U.S. dollar in local transactions while offering citizens the benefits of legality and convenience. As a tried and tested store of value, pundits are predicting instant adoption for the retail version of the GBDT.

Analysts at the central bank say they will be observing the application of the retail GBDT, noting that it could form the basis of a CBDC.

The central bank had previously issued physical gold coins, but the move came with the drawback of being limited in scope. Nearly all gold coins were swooped up by investors, with only 2% being redeemed, according to the bank.

The bank notes that the retail GBDTs would be broader in scope and offer “the same value preservation benefits of physical gold without the security risks and indivisibility of holding physical gold coins.” The banking regulator also pointed at the divisibility feature of retail GBDTs as a reason for their superiority over gold coins.

“On account of their effectiveness in mopping liquidity, the GBDTs have since proved to be an effective monetary policy instrument with strong potential to help restore normalcy to the domestic financial and capital markets within the short term,” read the report.

The central bank disclosed that it had entered into talks with key industry stakeholders, including the Retailers Association of Zimbabwe (RAZ), the Confederation of Zimbabwe Industries (CZI), and the Zimbabwe National Chamber of Commerce (ZNCC).

African CBDCs march on

Across the African continent, central banks are intensifying their probes into the viability of CBDCs. Kenya’s banking regulator says rolling out a CBDC is not at the top of its priorities but has launched a public consultation into the offering.

Central banks on the continent appear to have reached a consensus that CBDCs could be vital in improving financial inclusion in their countries but face stiff competition from existing payment options.

Nigeria remains the only country on the continent with a CBDC, but several reports theorize that a handful of African nations could roll out their digital currencies before the end of the decade.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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