Gold-backed tokens enter market Dr Mangudya

Golden Sibanda

Business News Editor

THE gold-backed digital tokens, now named Zimbabwe Gold or ZiG, became an approved means of payment for domestic transactions with effect from yesterday with any transactions going through ZimSwitch and the RTGS system in the same way as Zimbabwe dollars and US dollars being moved between bank accounts, with swipe machines being made available.

The ZiG is issued in units of 1 milligramme of gold and yesterday was worth $377,77 or 6,14 US cents; it is backed by bars of physical gold held by the Reserve Bank of Zimbabwe, and those holdings will now be audited by external auditors to ensure that the total of ZiGs issued by the RBZ are backed by at least the same amount of physical gold in a vault.

The tokens have been available as an investment or store of value for some months, but now if both a buyer and seller have ZiG bank accounts and agree to use the token for payment, they can buy and sell something through those accounts.

In a statement yesterday, Reserve Bank of Zimbabwe Governor Dr John Mangudya said the value of the ZiG would be at par with the value of the physical Mosi-a-Tunya gold coin, and will remain informed by the international gold price since it derives its value from gold reserves held by the RBZ.

The RBZ Monetary Policy Committee at its meeting on September 26 approved the use of ZiGs as one of the means of payment for domestic transactions, over and above its value preservation purpose, he   said.

“Banks will maintain dedicated ZiG accounts and intermediate transactions in ZiG in the same way they intermediate transactions in local and foreign currency.

“The applicable intermediated money transfer tax (IMTT) will be half of the IMTT applicable to transactions in foreign currency and the relevant legal instrument to that effect will soon be published.” The ZiG is not a currency, but an investment instrument, but now has approved transactional capabilities that individuals and institutions can use to grow their wealth while also being able to use the ZiG for payments when buyer and seller agree.

To combat doubts that the RBZ would maintain gold reserves adequate to back the ZIGs in bank accounts, Dr Mangudya said the RBZ had enlisted the services of external auditors to validate the availability and adequacy of gold to back the ZiG at any given time, which should engender confidence among investors and the transacting public.

Initially issued through the Central Securities Depository, the tokens will be transferred using the Rapid Transfer Gross Settlement (RTGS) system in support of their newly added function as a medium of exchange.

Dr Mangudya earlier said the gold-backed digital tokens were being issued to expand the value preserving instruments available in the economy, enhance divisibility of the investment instruments and widen their access as well as usage by the transacting public.

For transactional purposes, the Gold-Backed Digital Token will be known as Zimbabwe Gold (ZiG).

The tokens represent the digital form of the actual gold held by the RBZ. The value of a ZiG is quoted daily on the RBZ website.

Institutions and individuals will be able to buy the tokens using local or foreign currency from their banks.

Since the tokens will be divisible down to the smallest unit of gold measurement, a milligramme, it will be easy to get very close to the price in the actual currencies in use.

Further, because the tokens represent gold, holders will be able to gain value in the event the value of gold on global markets appreciates, which offers a flexible and reliable hedge against value erosion in periods of inflation.

“The first issuances were undertaken through the Central Securities Depository (CSD) system and banks advised their customers of their allotments. Going forward, issues will be undertaken through the RTGS system,” said Dr Mangudya.

In the same vein, the RBZ said it has already opened accounts for settlement by all the participating banks on the RTGS system.

Participating banks are expected to enable ZiG in customer accounts, cards and POS transactions as well as online channels. The cards will hold milligrams reflected in the ZiG account of the holder.

These milligrammes will be tradable and capable of facilitating person-to-person and person-to-business transactions.

According to the RBZ, these transactions will be cleared through the ZimSwitch and settled on the RTGS system.

Banker Mr Raymond Chitsuwa recently said the model made it easier for the buyer to know their balance as it is now a transaction between the RBZ and the buyer or seller of ZiG.

“The RTGS system is simpler to use in such a transaction than the central securities depository method, which needs the customer’s bank to notify their client that their purchase of ZiG has gone through. Now the client will have a bank account and will transact like any other account we have; the local currency and nostro accounts,” he said.

ZiG accounts at financial institutions will run alongside the nostro and local currency accounts. The ZiG account will remain in milligrams and will operate and settle in the same units.

Earlier, Dr Mangudya said there would be no account maintenance tariffs or charges for ZiG accounts.

Financial institutions are required to price ZiG transactions in a fair, affordable, and responsible manner for the benefit of the transacting public. The transaction price is what a bank charges to make the transfer.

Dr Mangudya said banks are not allowed to lend ZiGs nor pay interest on holdings, as the RBZ will be the only issuing bank.

The level of ZiG in the market will only change following issuance or redemption by the RBZ.

Customers who hold physical gold coins can elect to tokenise them and that process can be undertaken through the secondary market.

According to the RBZ, participating banks can, therefore, facilitate where there are investors with gold coins who require ZiG.

“Where the banks cannot exchange the physical gold coin, they should approach the Bank after the vesting period for redemption and payment in local currency, foreign currency or ZiG,” said the RBZ.

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