The central bank is set to release digital gold tokens today. The Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya, believes it will help stabilize the local currency by offering an alternative store of value and facilitating transactions for everyday people. Words he said before about the Mosi Oa Tunya, which has failed to do the same.

In the past month, the local currency has been losing value against the US dollar in the parallel market, increasing prices for basic commodities. The RBZ attributes the local unit’s depreciation to the “unlimited demand” for the US dollar. The digital gold tokens and the Mosi-oa-Tunya gold coins are expected to absorb excess liquidity in the market.

Dr Mangudya explained to The Sunday Mail that the tokens would function similarly to the physical gold coins, reducing demand for the US dollar as a store of value and halting local currency depreciation. The digital tokens issued in milligrams will be available for purchase at banks using foreign and local currency. They will be held in dedicated accounts such as e-gold wallets or e-gold cards.

Dr Mangudya also anticipates the tokens to support the government’s financial inclusion efforts. Like their physical counterparts, digital gold tokens serve a threefold purpose: saving, investing, and transacting. These tokens share the same features as the physical gold coins, including a 180-day vesting period and acting as a store of value.

Economist and RBZ Monetary Policy Committee member Mr Persistence Gwanyanya stated that gold is the only commodity that can rival the US dollar as a store of value. Digital gold tokens can be used for transactions of any amount, giving them an edge over the US dollar.

The RBZ announced last week that individuals can apply for tokens starting at a minimum of US$10, while financial institutions, corporations, and other entities can apply for a minimum of US$5,000. Pricing in foreign currency will follow the same model as physical gold coins. Payments for digital tokens or physical gold coins in local currency will be subject to a 20% margin above the interbank mid-rate.

The Mosi-oa-Tunya gold coins were introduced in July of the previous year, followed by smaller denomination gold coins in November. As of March 2023, more than $26 billion worth of gold coins had been sold.

Digital Gold Token Features

The digital tokens have a vesting period of 180 days and can be redeemed similarly to physical gold coins. Tradable and acceptable as collateral, these tokens facilitate Person-to-Person (P2P) and Person-to-Business (P2B) transactions and settlements. Applications for the RBZ Gold-Backed Digital Tokens can be made in minimum amounts of US$10 for individuals and US$5,000 for financial institutions, corporates, and other entities.

The offer opens on Monday, 8 May 2023, at 0800 hours and closes on Wednesday, 10 May 2023, at 1200 hours. Payment is scheduled for Thursday, 11 May 2023, with the issuance date set for Friday, 12 May 2023.

Special features of the Gold-Backed Digital Tokens include prescribed asset status, liquid asset status, acceptability as collateral, tradability, bearer instrument status, and settlement options in local or foreign currency.

The RBZ is issuing the digital tokens in line with the provisions of Section 7(d) of the Reserve Bank of Zimbabwe Act [Chapter 22:15], which empowers the Bank to buy, sell, discount or re-discount various financial instruments, and Section 47(3) of the Act, which grants the Bank discretion to buy, sell, and hold gold and foreign exchange assets.

The digital tokens can be redeemed after the 180-day vesting period, based on the international gold price determined by the London Bullion Market Association (LBMA) PM fix, payable in local or foreign currency. Payments will be made through the nominated custodial banks.

The RBZ is issuing the digital tokens in line with the provisions of Section 7(d) of the Reserve Bank of Zimbabwe Act [Chapter 22:15], which empowers the Bank to buy, sell, discount or re-discount various financial instruments, and Section 47(3) of the Act, which grants the Bank discretion to buy, sell, and hold gold and foreign exchange assets.

Nice from far but far from nice

As we have become accustomed to policy in Zimbabwe, ideas sound good at first mention. Or should we instead say the lack of detail leaves them open to interpretation and leaves all things possible?  Like the Mosi Oa Tunya gold coin, the digital version has lost appeal as details have emerged. The illusion of a blockchain digital currency has all disappeared, and what we have now is simply an intangible version of the Mosi Oa Tunya.