The Reserve Bank of Zimbabwe (RBZ) must feel like, ‘damned if we do, damned if we don’t.’ Whatever they do attracts negativity, even when it really shouldn’t. I understand why that is though.
The RBZ has a lot to atone for and until the masses believe it has cleansed enough blood from its hands, it will be attacked for curing cancer.
The RBZ announced that it would be introducing a gold-backed digital currency. The digital gold tokens so issued will be backed by gold held by the RBZ and will be used as legal tender in Zimbabwe.
You won’t believe the vitriol they are getting for that. Well, you will believe but it’s still something to behold.
Isn’t a gold-backed digital currency something Zimbabweans would want to get behind? Let’s talk about it.
Gold coins
The RBZ introduced the Mosi-oa-Tunya gold coins in mid-2022. We applauded the idea of gold as a currency instead of the fiat Zimbabwe dollar that continues to tumble.
Trust in the Zimbabwe government determines the value of the currency it issues. Trust in the Zimbabwe government is nearly non-existent, so there is no surprise that no one trusts their dollar. Not its own citizens and certainly not the international community which won’t even accept that funny currency.
Trust in the value of gold is not dependent on the Zimbabwe govt’s actions or misactions. Not even the Gold Mafia can affect gold’s value across the planet. That shiny metal has had value for centuries and no group of thugs are going to undo that.
With that backdrop, we welcomed the gold coins.
There was one major problem though. The coin was not meant for everyday Joes and Jills like us. With a single coin costing over US$1000, it was obvious that the gold coins were to be a store of value for the fortunate, the mbingas of Zimbabwe.
We decried that fact and the recently announced gold-backed tokens are the answer we cried for then?
Digital gold tokens
The RBZ is introducing a currency that is backed by gold. Meaning if you have a note (a digital token in this case because there won’t be a physical representation) you have a claim to real gold in some vault somewhere.
For those of you who were old enough to have used the old Zimbabwe dollar you may remember that there was an inscription on the notes that said, ‘I promise to pay the bearer on demand…’ That was a relic from a time when currencies were really just IOUs, with the real money being the gold stored somewhere.
Zimbabwe is going back to that beautiful time before mere paper was money.
We are doing away with paper and saying, we will issue tokens that are essentially IOUs from the govt to the bearer. To say whoever has that token is entitled to gold in their vaults.
That all sounds good but there is a key difference between these tokens and the Mosi-oa-Tunya gold coins.
Gold coins vs digital gold tokens
The history of money tells us that those who were supposed to be safeguarding the people’s gold and ensuring that every single IOU (note) really had gold to back it up ended up giving out more notes than the gold supported.
That’s not a problem with the gold coins. There, you literally hold the gold yourself or have some other bank hold it on your behalf.
With the digital gold tokens, you don’t actually hold the gold and so you have to trust that the gold backing that token really exists.
That changes everything in my opinion. We are back to that dirty word – trust. Do I trust that the RBZ will indeed hold the gold that backs those digital gold coins? I find that I am a man of little faith. I do not possess such trust in the RBZ.
That is what may be the undoing of an otherwise good idea.
It is impractical to have tiny gold coins for values as small as US$10 and so if you are to hold $10 worth of gold, it will have to be a token. So, the RBZ is right to play it this way. Too bad a token requires some level of trust, which will be a difficult ask for many I presume.
Digital gold vs ZW$
The RBZ governor announced that they noticed that demand for foreign currency is driven not only by the need to import goods and services but also by the public viewing it as a store of value.
I’m amazed he says they ‘noticed’ this. It didn’t need noticing, it has been so in our faces as the reality, it didn’t need noticing.
Anyway, digital gold coins are supposed to be an alternative to the USD for the masses. Instead of everyone flocking to the streets to convert whatever ZW$ may fall into their pockets, they should consider getting a gold-backed digital token from their favourite central bank.
It is a hard sell but considering how getting USD on the streets is technically illegal, the digital gold should have takers.
This should lower demand for the USD and in turn, lead to the ZW$ firming up against the USD if the RBZ’s hopes come true. We shall see where the stick and the snot-apple fall.
Zimbabwe may be a tough economy to live in. What it isn’t is boring though. That may not be good for investors who crave predictability and stability but it is entertaining for the neutrals.
Do tell us what you think about the gold-backed digital tokens. Will you be deleting your forex dealer’s phone number and meeting your store of value needs using Mangudya’s tokens? Let it all out in the comments section below.
Also read:
I think I know who the gold coins are actually for and it sickens me
Zim govt looking at central bank digital currency, what is that and why won’t it fix our problems
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22 comments
Lol, I straight up forgot about these things! Too poor to care I guess 😂
And on the matter of trust, how would I know if the gold allegedly backing my digital money isn’t in the arms of an angel, flying on gilded wings to Dubai? Number 1 would have to livestream the vault 24/7 and publish tripple independent audits every week before I’d be like ‘ok, maybe I’ll try this’🤣
Exactly 🤣. With the RBZ as the gold caretaker I would need assurances that would be impractical for them to give. I would want that 24/7 live stream you talked about and would still want access to physically check that all the gold is there whenever I wanted to. Can’t risk them playing a video on loop when the vault has been emptied up.
I had forgotten too 😂 Gold coins who?
Let’s just stop treating gold as a sacred metal in zim. Ngatimbobatai magold coins tiise muhomwe tozotaura. The tokens are good for my security if I have the option to take the gold coin home.
Like you said, trust is earned and not demanded. Herein lies the problem with the keeper of the gold tokens: he lost our trust long back.
Given a chance I’ll still go to Roadport to personally scrutinize every greenback I want to be a store of value. It’s better that way.
EXACTLY! Trust can be lost by a single small act but to regain it needs a LONG GOOD TRACK RECORD. RBZ hasn’t even begun on that track
I for one am ecstatic, I cannot wait for these things to roll out , I am no fan of the government but this is one damn good idea , I’m in and I think all Zimbabweans must offer credit where it’s due , this idea might just change everything
It will work , Zimbabwe is the only place on earth people can pretend leaves have the same value as the US dollar , for the good of the nation we must once again trust
Hahaha! And just how will this so-called currency be denominated for a start? Why not just back the the current digital Zim dollar with gold? We all know the answer to that one! How will I pay for a loaf of bread with this currency? This is just a smoke-&-mirrors scam that has no connection to reality…
another rbz scam, 3rd time in 16 years dont fall for it, keep your usd safe and away from these ticks !
Zimbabwe a country of theifery Mangudya publicly stated tht if bond notes failed i wil resign but he is stil unfolding the rope at rbz. With power comes accountability and it all lacks here. Even Mthuli had to leave Europe where ethics and accountability abound cmn for spoils in the new dispensation and h is enjoying th loot u js have to be a good liar to get a job in Zanu pf led government and it works
Too bad, they dont have enough discipline to store even 10 tonnes. As we speak its seems they currently have about 350kg stored up. Do you know to stabilise a digitao backed coin, you’l need lots and lots of gold. Apa muchienda ku Dubai nema tonnes acho. This year alone, zim is expected to get 40tonned of Gold production. Can we not start holding up at least 1/4 of this a year. No because we have people that dont know how to formalise industries. Seems like a move to respond the the aljazeera expose, lol, which turned a lot more unstrust to mistrust in most of us. If there is any english word like that. They should just formalise the Gold industry, despite sanctions, many countrues will buy then we export formaly using our own jets or the customers jets. And then the money, stays here and we do what we do. Izvi zvenjuga, zvinonetsa. Surprising how Mangudya now talks about the parallel market rate stabilising, yet parallel should not be notmalised the way he is stating it. It should be abolished. Iro USD that we trust irori, do you know a big part of the world is starting to ditch it. They should formalise the gold industry, store lots of tonnes locally, back the RTGS, roita token redu muno. Then we can start talking. Because prices will tumble over time, if they back the rtgs, and be close to a normal currency valuation. Formalise the gold, have international buyers come. Already russia, china are big buyers I know will come, despite sanctions, take it from the russian rule books, we can beat sanctions. Having centrally backed currency is dangerous, hencewhy ana Bictoin took off.
It should not be another currency back irori rtgs. At least then we will start talking, because that will be a sign that they really want to fix the currency issues. Taming the horse on the job. it will take a lot of discipline, some economic crunch, but benefit us all. Storr the gold year on year, and guarantee reserves. As risky as it sounds knowing our greedy people it will be a good start. Hatidi imwe bitcoin muno, tinoda RTGS backed by gold, simple, because that will translate ZWL bacjed by gold. No matter what the international IMFs and World banks will discourage us, which they have been doing. They should just do it. After all they are the perpetrators of our monetary mess, with their sanctions. RBZ should now bend the international rules, and back the local currency with gold, no to another tokenized system, too much speculation ground.
1. Establish a completely independent store for the gold and let it be properly audited
2. Back the Zim $ with gold
3. Win back trust
These CBDCs have failed look at the Bahamas situation now I’m sure history will repeat itself in Zimbabwe
what poor jokes. We had the Zim Bond Note backed by The Afrexim Bank and guaranteed equal ‘1:1 with the USD etc etc – today 2000 Zim dollars for 1 single US$!
Then they say ‘we will back with Gold?’ My foot! They want to come up with another fools gold
Mangudya’s RBZ trust currency was/is lost forever……..no dreaming..!
The country is broke mthuli said it. So how do you store gold to backup these tokens
Mangudya should just resign and shout those brilliant ideas from the side lines. Its ok you have done your best. But you associated with many failures so for sure trusting your organization is risky and renders us the citizens stupid.
People have learnt to believe in what they see rather than what they hear. People just do not wake up and begin to trust….trust is earned not shoved upon. People trust when they see that they are not dealing with crooks,thieves. When the economy is robust, you do not need a lawyer to proove that it is and that is the source of your trust. A decree to either own or liquidate Gold reserves can turn citizens’ fortunes either way. The problem is people ‘think’ that an economy can be fixed by selling Gold reserves to prop up a weak currency. No way. Those loaded with money already will just take the gold & run leaving you with nothing, if not worse. Even a stick can be used as currency if people agree that no one is going to produce counterfeits and serious measures are put to prevent that. Printing a fiat curreny to finance an economy is similar to counterfeiting.That is the reason why countries with powerful fiat currencies moved away from this because they were losing their gold reserves..BUT everyone can see how robust their economies are…relatively to our own ,through serious production on all facets. That’s why some countries you know decided to have zero tolerance to corruption….death . The problem there is that some innocent souls may be sacrificed there depending on who is judge & jury. This may sound very extreme but unfortunately, they had to do that to rebuild their economies and build confidence.
What is wrong with this picture:
You have spent the whole month working your butt off for nothing, you are then told to ‘buy’ gold coins if you want the money you earned after working to have value because,as they say, they have realised that people want a store of ‘wealth’ since they are chasing after the US$ whereas right now,workers are forced to buy the US$ on the Black market after getting paid for rentals, Zupco fares,car fuel,school fees,basics in supermarkets(rated goods)….everywhere, because it is the money with value. Why then not just pay the poor worker directly using that coin? They will not do that because they would rather give the worker inflated Zwd pay worth nothing with payslips written e.g 2022 backpay zwd $20000. Grand sounding but signifying nothing. It would then be very apparent that people are being fleeced if they state ‘2022 backpay US$10.’