The Reserve Bank of Zimbabwe (RBZ) has officially launched its gold-backed digital token dubbed Zimbabwe Gold (ZiG) as a payment option for retail use nationwide.

In a statement, the central bank confirmed that ZiG will operate as legal tender, mandating banks and enterprises to accept the digital currency. In the future, commercial banks are expected to maintain dedicated ZiG accounts like other currencies in the country.

The RBZ noted that each digital token will be backed by gold in its reserves, with its value pegged to the international gold price. The central bank disclosed that it would take only half of the applicable intermediated money transfer tax (IMTT) to increase the adoption of the new payment method.

“The issuance of the gold-backed digital tokens is meant to expand the value-preserving instruments available in the economy and enhance divisibility of the investments and widen their access and usage by the public,” said RBZ Governor John Mangudya.

The central bank has been exploring options to achieve a sense of normalcy amid the inflation and economic downturns, while citizens have turned to the U.S. dollar to protect the value of their wealth, although the scarcity of greenback complicates the process for ordinary Zimbabweans.

To prevent the dollarization of the local economy, the RBZ began testing the waters with a gold-backed digital token in April, achieving impressive adoption levels. Buoyed by the initial wins, the central bank announced its intent to launch a retail version that analysts described as a central bank digital currency (CBDC).

“On account of their effectiveness in mopping liquidity, the GBDTs have since proved to be an effective monetary policy instrument with strong potential to help restore normalcy to the domestic financial and capital markets within the short term,” said the RBZ back in August.

Critics have poked holes into the real-world usage of ZiG, asking probing questions about their availability and the adequacy of gold to back the digital currency. In response, the bank says it has enlisted the services of external auditors to ensure ZiG’s availability for payments or to preserve residents’ wealth.

The state of CBDCs on the continent

African central banks are joining their counterparts in other regions to begin exploring the applicability of CBDCs in their local economies. Nigeria‘s launch of the e-naira in 2021 set the pace for CBDC development, but low adoption levels have dampened the initial enthusiasm of African banking regulators.

Kenya‘s central bank recently launched a public consultation but noted that a CBDC launch is “not at the top of its priorities” now. However, the potential of improving financial inclusion and cross-border payments could see several African countries launch digital versions of their national currencies before 2030.