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Zimbabwe Officially Adopts Gold-backed Digital Token 'ZiG' as Legal Tender

According to the announcement, RBZ has hired the services of external auditors to validate the availability and adequacy of gold to back ZiG at any given time.

Shashank Bhardwaj
Published: Oct 12, 2023 11:47:46 AM IST
Updated: Oct 16, 2023 11:51:54 AM IST

Zimbabwe Officially Adopts Gold-backed Digital Token 'ZiG' as Legal TenderImage: Shutterstock

On Oct 5, the Reserve Bank of Zimbabwe (RBZ) announced that Zimbabwe Gold (ZiG), a digital token backed by gold, will be considered legal tender in the country.

The gold-backed digital token was rolled out in April this year as one of the first digital currencies to be introduced by the country’s central bank. Effective Oct 5, ZiG can be used as a means of payment for domestic transactions, over and above its value-preservation purpose.

According to the announcement, banks in Zimbabwe will maintain dedicated ZiG accounts and intermediate transactions in ZiG the way they maintain intermediate transactions in local and foreign currency. The applicable intermediated money transfer tax (IMTT) will be half of the IMTT applicable to transactions in foreign currency. The relevant legal instrument to that effect will be published soon.

ZiG will have the same value as the Mosi-oa-Tunya gold coins given to Zimbabwe’s commercial banks in 2022 by the RBZ for retail transactions. They were introduced due to instability in the local currency and Zimbabweans’ preference for using the U.S. dollar.

Zimbabwe has struggled with currency instability and rising inflation for over a decade. In 2009, the nation adopted the U.S. dollar as its official currency in response to hyperinflation that had rendered the local currency practically worthless. To revitalise the domestic economy, Zimbabwe reintroduced its currency in 2019.

However, this move led to a resurgence of currency volatility. Thus, to stabilise the country’s local unit, which has been faltering against the U.S. dollar, the RBZ introduced gold coins in 2022.

RBZ Governor John Mangudya said the introduction of both gold coins and digital gold-backed tokens is intended to incentivize investors to put money into “national assets” instead of U.S. dollars: “The issuance of the gold-backed digital tokens is meant to expand the value-preserving instruments available in the economy and enhance divisibility of the investment instruments and widen their access and usage by the public.”

Zimbabwe has laboured under inflationary periods for a prolonged time. The reliance on gold-backed digital assets will likely reduce the country’s dependency on the U.S. dollar. Gold’s stability means it has no counterparty risk. It may prove to be a better long-term store of value than other fiat currencies. 

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash

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