Zimpapers Logo

Business Reporter

The Reserve Bank of Zimbabwe (RBZ) says the use of Gold-Backed Digital Tokens (GBDT) for transactional purposes will, apart from serving as an investment instrument, bring additional convenience to the country’s payment systems.

Initially issued through the central securities depository, the tokens will now be transferred using the rapid transfer gross settlement (RTGS) system in support of their newly added function as a medium of exchange.

RBZ Governor Dr John Mangudya said, “The GBDT are 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 GBDT will be known as Zimbabwe Gold (ZiG). The tokens represent the digital form of the actual held by the central bank. Institutions and individuals will be able to buy the tokens using local or foreign currency from the banks.

Since the tokens will be divisible down to the smallest unit of gold measurement; a milligram (US$0,60), the public will be able to transfer any value equivalent to the value of their payment during a transaction.

Further, because the tokens represent gold, holders will be able to gain value in the event that the value of gold on global markets appreciates, offering 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.”

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 milligrams will be tradable and capable of facilitating Person-to-Person (P2P) and Person-to-Business (P2B) transactions.

According to the bank, these transactions will be cleared through the National Switch (Zimswitch) and settled on the RTGS system.

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

“The RTGS system is simpler to use in such a transaction than the CSD 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.

“There will be no account maintenance tariffs or charges for ZiG accounts. Financial institutions should price ZiG transactions in a fair, affordable, responsible manner for the benefit of the transacting public,” the governor added.

Mr Chitsuwa added, “The central bank has put these modalities in order to not create new ZiG, which might end up not tallying with the physical gold in their vault causing an artificial balance in the banking sector, thus shortchanging holders of the new currency.”

According to the governor, banks are not allowed to lend ZiG as well as earn interest as the central bank will be the only issuing bank of the currency.

“ZiG shall only be issued by the Reserve Bank of Zimbabwe. Banks shall not be allowed to lend ZiG. In addition, ZiG is not going to earn interest. The level of ZiG in the market will only change following issuance or redemption by the Bank,” the governor added.

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 vesting period for redemption and payment in local currency, foreign currency or ZiG,” the bank said.