In a move to manage its currency crisis, Zimbabwe with the one hundred trillion dollar banknote is going digital. Last week, the Reserve Bank of Zimbabwe (RBZ) announced that it will launch a digital currency backed by gold.
This move is the initial step towards linking the Zimbabwe dollar to the gold reserves of the country. The digital tokens will have a 180-day vesting time and are redeemable – similar to the physical gold coins.
Holders of physical gold coins will be able to exchange or convert their gold into the gold-backed digital tokens.
From May 8, the gold-backed digital tokens will be available for purchase. The minimum price for buying a token will be $10 for individuals and $5,000 for corporate and business entities.
The Southern African country has been struggling with severe currency volatility and high inflation rates. In a bid to manage the currency crises, Zimbabwe switched to the US dollar in 2009 when inflation reached 230,000,000 percent. It reverted to the Zimbabwean dollar in 2019, but the US dollar made its way back in 2022 after worsened economic conditions.
The new digital currency will serve as the digital equivalent of the Mosi-oa-Tunya coins that were released in 2022.
After the release of the 100 billion dollar note, which currently holds the Guinness record for the world’s highest denomination banknote, the Reserve Bank of Zimbabwe released the 100 trillion dollar banknote. The two banknotes failed to fix the hyperinflation crisis.
The gold-backed token initiative by Zimbabwe is not the first digital currency. Several central banks around the world are exploring digital equivalents of their current currencies. For instance, the Bank of Japan kickstarted a pilot program for digital yen in April. Other examples of central bank digital currencies include India’s digital rupee, China’s digital yuan, UK’s digital pound, among others.
This is a welcome development and shows that more countries are ready for the way we will conduct business in the virtual world. Meanwhile, some people, like the US senator Ted Cruz, are skeptical and worry that CBDCs will affect Bitcoin’s value negatively.