The Reserve Bank of Zimbabwe (RBZ) has expressed its desire to establish a new form of digital money known as the Gold-Backed Digital Token (GBDT). This digital currency will be underpinned by gold bullion reserves held by the central bank.
The decision to undertake this action is in line with the Reserve Bank of Zimbabwe’s endeavors to achieve stability for its own currency, which has been experiencing significant devaluation.
The official introduction of GBDT was first made in May, in response to the urgent demand for dependable and feasible market-driven resolutions.
The presence of an exceptionally high inflation rate of 175.8% in June served as an additional catalyst for increased demand from domestic investors.
GBDT Issuances And Investor Response
The Bank had already carried out 11 GBDT issuances as of July 21 according to RBZ Governor John Mangudya, who made the announcement on August 9 during the unveiling of the Mid-Term Monetary Policy Statement.
The reaction garnered attention because of the significant number of applications received, totaling 590, which collectively represented a substantial amount of gold weighing 325.02 kg.
Significant endeavors are currently being made to establish GBDTs as a recognized and acceptable means of conducting transactions.
Mangudya underscored the imminent execution of the upcoming phase, commonly known as “ZiG” or the Zimbabwean precious metal.
This phase would involve the transformation of GBDTs from mere repositories of value to functional currencies for everyday transactions, essentially establishing them as a form of Central Bank Digital Currency (CBDC).
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One significant characteristic of GBDTs is their robust reliance on physical gold reserves, which distinguishes them from conventional digital currencies.
In the current economic environment, when only a limited number of central banks maintain gold reserves that closely align with the value of their currency in circulation, GBDTs have emerged as a novel departure from the conventional approach.
The utilization of gold as an economic tool to strengthen Zimbabwe’s financial structure reflects historical customs reminiscent of the period when central banks adhered to the gold standard.
Doubt And Uncertainty In Fiat Currencies
Furthermore, the digital gold initiative in Zimbabwe aligns with an emerging pattern of doubt and uncertainty surrounding traditional fiat currencies.
Within the global setting, there have been parallel arguments regarding the issue of power concentration within central banks. In the context of the United States, there is often an overlap between views that support GBDTs and critiques of central bank digital currencies.
The Republican lawmakers exhibit a noticeable increase in opposition towards the power of the Federal Reserve.
They have advocated for the implementation of policies to CBDCs in places such as Florida, while simultaneously working towards the creation of GBDTs, as evidenced in Texas.
This is consistent with the growing distrust within the Republican Party towards the centralized authority of the US central bank, as observed across different party subgroups.
Featured image from BullionStar