The Zimbabwean dollar is plunged into an inflationary spiral. Zimbabwe was over 90% last year, but that’s a problem they’ve been dragging on for decades. To alleviate this situation, the Central Bank of Zimbabwe has an idea.

A CBDC connected to the safe harbor. In the strategy developed by local newspaper The Sunday Mail, the central bank will create a digital currency whose value will be tied to that of gold. This is a CBDC that will serve as the legal currency and citizens of the country can exchange an as yet undetermined amount of Zimbabwean dollars for this gold-backed currency.

A return to gold in times of crisis. Zimbabwe has gold reserves, but this asset is impractical when it comes to payment. However, it is a very useful refuge value, especially in the face of economic uncertainty.

Governor Dr. As Mangudya explained, the central bank is considering how to use this gold to fight inflation. One option is to print more gold coins; the other is to create a digital currency whose value is similar to that of valuable material as a safe haven.

“What we realized is that besides the need to import goods and services to Zimbabwe, the demand for foreign currency is also a store of value,” Mangudya said.

A crypto tied to very private gold reserves. This is not the first time we have a gold-linked cryptocurrency. Among stablecoins, it is easy to find projects that offer this premise, such as Gold Coin (GLC) or Meld Gold (MCAU). However, they are based on privately held gold reserves or the international value of the gold itself.

Zimbabwe’s proposal is much more concrete. It’s not just any gold, it’s what they have in their national reserves. It is tangible material accessible to the government and of sufficient value to attempt to convey sufficient confidence to investors.

An idea that is currently being studied by international organizations. Shaokai Fan, director of the World Central Council of Gold Banks, explained a few years ago that “CBDCs have great potential to influence society.” And that’s why it’s important to analyze “the impact of this very new form of money on one of the oldest, gold.”

Together with the Official Monetary and Financial Institutions Forum (OMFIF), they have published a study on the impact of digital currencies on gold reserves. “Gold, like other assets, is very likely to go digital soon and benefit from it,” he explains.

Be careful, because the value of gold is at stake. Today, the US dollar is the basis for most reserves in terms of international payments. It’s something China and Russia are trying to change. With the expected arrival of central bank virtual currencies, the economic system may undergo significant changes. This is where gold reserves come into play.

“The impact of these changes on gold is uncertain and will depend on a number of important considerations, such as the design of CBDCs and their degree of access,” the report said.

Image | Erik Torner

on Xataka | The future of money will be digital. But only when governments and central banks allow it.