Zimbabwe gold backed digital currency and gold backed cryptocurrency. Are we looking at a new trend?

 

Zimbabwe's gold-backed digital currency will be used as legal tender and as a store of value, along with the Zimbabwean dollar and bond notes as legal tender.

You can purchase the gold coin on the Central Bank of Zimbabwe's website.

The country's gold-backed digital currency comes a year after it launched gold coins to stabilize its rapidly devaluing currency.

Zimbabwe launched a gold-backed digital currency for peer-to-peer and peer-to-business transactions, as well as a store of value as its currency continues to lose value, in May of 2023.

In a statement, the Reserve Bank of Zimbabwe invited individual and corporate entities to use the digital currency, which can be purchased either in Zimbabwean dollars or foreign currency, by exchanging or converting gold coins through the banking system into gold-backed digital tokens.

Here's what you need to know about the new currency.

A gold-backed digital currency is what it sounds like.

The value of this currency is determined by the market value of gold, unlike a fiat currency that is backed by a certain amount of gold.

Together with the Zimbabwean dollar and bond notes, the gold-backed digital currency will serve as legal tender and a store of value.

The Zimbabwean dollar and other foreign currencies can be used to buy and sell it.

As a general rule, backing a digital currency with gold involves having a certain amount of gold reserves, and it is determined by the current gold market value.

Zimbabwe reported in April having 350kg (12,346 ounces) of gold in reserves valued at $22.80m at the current price. It plans to build reserves to around $100m by the end of the year.   This  may be an indication to invest in the Zimbabwe currency.

Cryptocurrency Backed by Gold

Like any other type of cryptocurrency, gold-backed cryptocurrencies are valued based on the current gold market price.

In order to prevent excessive price fluctuations, some cryptocurrencies are backed by gold to tie the derivative asset (crypto) to a tangible asset (gold). There is a lower level of volatility in gold prices than in other assets, such as stocks or cryptocurrencies, so gold-backed cryptocurrency is generally more stable.

As gold prices rise, gold-backed cryptocurrency's value will also increase, protecting investors from losing money if other assets, such as stocks, fall in value.

In the same way that other cryptocurrencies can be purchased and sold on exchanges, gold-backed cryptocurrencies can also be used to purchase goods and services online. In addition to enjoying increased returns from gold's pricing, gold-backed cryptocurrencies can be redeemed for gold.