The Reserve Bank of Zimbabwe (RBZ) is in the advanced stages of its plan to launch a gold-backed digital currency.
Building on the RBZ’s Gold-Backed Digital Token (GBDT), the digital currency will be backed by gold bullion held by the central bank.
Reserve Bank of Zimbabwe Ramps up Digital Gold Project
First announced in April, the GBDT is intended to help stabilize the Zimbabwean dollar. It is also conceived as a way for Zimbabweans to hedge against inflation, which has remained persistently high for years.
Presenting the monetary policy statement on Wednesday (Aug. 9), RBZ Governor John Mangudya revealed that as of July 21., the Bank had conducted 11 issuances of GBDT. He noted that the bank received 590 applications to purchase tokens equivalent to 325.02 KG of gold.
From Gold-Backed Tokens to CBDCs
Going forward, Mangudya stated that:
“The Bank is at an advanced stage in the preparations for the eventual rolling out of GBDT for transactional purposes in Phase II of the project under the code or name ZiG, which stands for Zimbabwe Gold.”
He added that the transactional form of Zimbabwe’s digital gold tokens would complement US dollars in domestic transactions.
By transitioning GBDTs from a pure store of value to a currency used for everyday transactions, the RBZ is essentially proposing using the tokens as a CBDC.
However, the key difference between GBDTs and most CBDCs is that few currency-issuing central banks keep gold reserves near equivalent to the currency’s value in circulation.
The Politico-Economic Appeal of GBDTs
As a monetary policy instrument, the growing importance of gold in underpinning Zimbabwe’s financial system harks back to a time when central banks adhered to the gold standard.
Moreover, the country’s foray into digital gold resonates with a growing interest in the concept among critics of fiat currencies.
For example, arguments favoring GBDTs in the US have become increasingly entwined with arguments against CBDCs. And both rest upon a general suspicion of allowing too much power to become concentrated with the Federal Reserve.
It is no coincidence that Republican lawmakers have been the ones to spearhead efforts to ban CBDCs in Florida and a bid to launch a GBDT in Texas. After all, the GOP has become increasingly critical of the Fed across its different wings in recent years.
Ultimately, both anti-CBDC policies and digital gold initiatives assert states’ economic autonomy. As such, they appeal to advocates of de-federalization who object to what they perceive as overly centralized fiscal administration.
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