Zimbabwe Resurrects Gold Coins: When Digital Technology Goes Live

Harare, Zimbabwe – In a renewed effort to stabilize its currency and restore public confidence, Zimbabwe is returning to one of the oldest symbols of financial value: physical gold. Less than a year after abandoning its gold coin program, the Reserve Bank of Zimbabwe has decided to revive the issuance of physical gold coins – a move that marks a marked shift in strategy following the failure of its digital solution.

From technology to tradition
In April 2023, Zimbabwe launched a gold-backed digital token – initially called ZiG, later renamed GBDT – with the aim of providing a store of value and currency stability amid soaring inflation. However, confidence in the new technology quickly waned.

Although the Central Bank recorded more than 135 applications for the first issuance, worth around $12 million, interest has since plummeted – with just 35 new applications recorded by June 2023. People still prefer to hold dollars rather than transact via e-wallets or digital gold cards. Painful memories of the hyperinflation of the 2000s still weigh heavily on the minds of many Zimbabweans.

The ‘Mosi-Oa-Tunya’ is back
In response, the government has decided to return to traditional assets. The “Mosi-Oa-Tunya” gold coin – named after Victoria Falls – is being re-sold to the market through banks such as the Central Africa Building Society and Nedbank Zimbabwe as an alternative investment for domestic investors.

The coins are issued in denominations ranging from a tenth of an ounce to a full ounce, making them accessible to both retail and institutional investors, according to Bloomberg.

“Global gold prices are high and this creates an attractive opportunity to reactivate our store of value,” said Persistence Gwanyanya, a member of Zimbabwe’s monetary policy committee.

A Bet on Gold Amid Financial Turmoil
Zimbabwe is currently grappling with a severe devaluation of its currency — it has slid about 65% against the dollar this year alone on the official market, while the black market has been even more severe. While the government has persisted in pursuing monetary reforms, the IMF has repeatedly warned that using gold reserves to back digital currencies could erode national wealth and be ineffective in the long term.

Indeed, Zimbabwe has only raised about 1 ton of gold to back its digital currency, while an organization like Tether bought up to 8 tons of gold in the first quarter of this year to back its gold-backed token XAUT.

Gold: An Old Trend Returns
The decision to re-introduce gold coins comes at a time when global gold prices have risen by about 25% since the beginning of the year – partly due to global economic concerns and geopolitical tensions. Zimbabwe, with gold as one of its main exports, earned nearly $396 million from gold in the first quarter of this year – up significantly from $303 million in the same period last year.

However, no one is sure that the return of gold coins will be a miracle solution. Zimbabwe abolished its domestic currency in 2009 after hyperinflation rendered it worthless, then reintroduced it in 2019 with mixed results.

While many African countries like Nigeria are experimenting with central bank digital currencies (CBDCs) like eNaira, Zimbabwe is turning back to “physical assets” – a move against the grain, but one that is expected to create short-term stability.