Gold-backed digital tokens by next week: RBZ

THE Reserve Bank of Zimbabwe has set Monday as the commencement date for the issuance of gold-backed digital tokens meant to expand the value-preserving instruments already available to stabilise the economy

The gold-backed digital tokens follow the successful injection of Mosi-oa-Tunya gold coins in July last year, which started with higher-denominations and later followed up by smaller denominations in November due to high demand in the market.

The gold coins are part of measures to ensure investors, mostly cash-rich institutions, have alternative means to preserve value.

Reserve Bank of Zimbabwe

Pursuant to the resolution of the Monetary Policy Committee on March 28, this year, and to complement the issuance of physical gold coins with gold-backed digital products, RBZ governor Dr John Mangudya has said the central bank will be issuing gold-backed digital tokens with effect from May 8.

The issuance will be in a two-phased approach. The tokens will be available for sale through banks in both foreign currency and Zimbabwe dollar.

The pricing of the gold-backed digital tokens in foreign currency shall remain the same as the pricing model of the physical gold coins as informed or guided by the international gold price as determined by the London Bullion Market Association (LBMA) PM fix, said Dr Mangudya.

The payment for the gold-backed digital tokens or physical gold coins in Zimbabwe dollar shall remain at 20 percent margin above the willing-buyer willing-seller interbank mid-rate, he added.

“The gold-backed tokens will be fully backed by physical gold held by the bank. As previously advised, 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,” said Dr Mangudya.

In the first phase, Dr Mangudya indicated that the gold-backed digital tokens will be issued for investment purposes with a vesting period of 180 days and redeemable in the same way as the existing physical gold coins.

“Banks will create dedicated or specific accounts for the holding of the gold-backed digital tokens (e-gold wallets or e-gold cards). Holders of physical gold coins, at their discretion, will be able to exchange or convert, through the banking system, the physical gold coins into gold-backed digital tokens.”

Turning to the second phase, the governor said the gold-backed digital tokens held in either e-gold wallets or e-gold cards will be tradable and capable of facilitating person-to-person and person-to- business (P2B) transactions and settlements.

Gold coins

“It, therefore, means that the gold-backed digital tokens would be used both as a means of payment and a store of value,” he said.

It has been noted by analysts that price stability is an added advantage of buying gold coins for investment and when compared to other investment options in the market, the price of gold never falls by a significant margin and is rather always stable even during a global financial crisis.

Worldwide people look at gold as an alternative to currency, particularly where the local money is prone to losing value.

Gold is viewed as a real physical asset that tends to maintain its value in the market, which, in turn, proves that buying gold coins is a good investment option. — chronicle