Zimbabwe to issue digital currency backed by gold in an attempt to stabilize its domestic currency devaluation crisis.

Zimbabwe, with a history of severe currency devaluation, is set to launch a digital currency backed by gold reserves in an attempt to stabilize the domestic currency devaluation crisis.

Zimbabwe Background

Zimbabwe, officially the Republic of Zimbabwe, is located in southern Africa and has a dark history of severe currency devaluation. During the period of "hyperinflation" from 2000 to 2009, it took 100 billion Zimbabwean dollars to exchange for 1 U.S. dollar. The authorities even issued banknotes with denominations as high as 100 trillion, making them the highest denomination banknotes in world history, but in reality, they could only buy a loaf of bread.

Although there have been several reforms since then, the local population has abandoned the use of the Zimbabwean dollar directly. The U.S. dollar, euro, pound sterling, Australian dollar, and South African rand are commonly seen currencies in the country. The use of the U.S. dollar surpassed the Zimbabwean dollar in 2023, reaching over 70%. According to official data, Zimbabwe's inflation remains high, with a CPI of 87.6% in March this year, having hovered around 100% in the previous six months.

High inflation boosts the price of gold. You can also read: Tokenized gold market value exceeds $1 billion, what is gold stablecoin PAXG?

Mosi-oa-tunya Coin

Zimbabwe issued the Mosi-oa-tunya Coin in July last year, with a total issuance of 2000 coins, each containing one troy ounce of gold, abbreviated as TOZ. One troy ounce is approximately 31.1 grams. The initial issue price was $1823.8, and it could also be purchased with euros, pounds sterling, Australian dollars, and South African rand. The coin features the design of the famous natural wonder of Victoria Falls, with each coin having a serial number and accompanying certificate, to be sold at a price of 5% above the current international gold price and production cost.

The Reserve Bank of Zimbabwe stated that these coins would be used for domestic and international transactions, exchangeable for cash, with the aim of reducing the quantity of Zimbabwean dollars in circulation. They can also be used in stores, provided that the store "can provide change" – the selling price of one coin by the central bank of the country is about 800,000 Zimbabwean dollars.

Gold-Backed Digital Currency

According to a report by Bloomberg, Zimbabwe plans to issue a digital currency backed by gold bars, requiring $100 million worth of gold to initiate the project.

As reported by the country's media, Zimbabwe has 350 kilograms of gold reserves worth about $24.69 million. The country aims to increase its gold production by 14% this year to reach 40 tons. According to data provided by Fidelity Gold Refineries, the country's sole refinery made a profit of $377 million from gold production in the first quarter, down from $463 million a year ago.

Last month, the Zimbabwe Monetary Policy Committee approved the gold-backed digital currency plan. Deputy Governor of the central bank, Innocent Matshe, stated:

This is a very simple concept. We have gold, we tokenize it, and for every token we issue, there is real gold backing it. However, we are still finalizing details to determine the launch date of the gold-backed digital currency.