ZiG Currency Faces Challenges at Home Despite Success Abroad
Money & Markets Zimbabwe

ZiG Currency Faces Challenges at Home Despite Success Abroad

The Zimbabwe Gold (ZiG) currency, which evolved from a gold-backed token, has performed well on the foreign exchange market but is encountering difficulties domestically. On June 4, the Zimbabwe Reserve Bank (ZRB) announced new measures to combat the black market for the currency and improve its usability.

The ZRB used its X account to directly appeal to the public, urging people to report illegal currency traders or businesses that refuse to accept the new currency. This move is part of an ongoing effort to curb illegal foreign exchange trading, often conducted at unofficial rates. According to Bloomberg, the ZiG has appreciated by 1.9% against the US dollar since its introduction in physical form.

Mixed Success of ZiG Introduction

On May 15, South African-based Crime Watch Zimbabwe reported that Zimbabwean police had arrested 224 illegal FX traders. Additionally, the RBZ Financial Intelligence Unit (FIU) froze 90 bank accounts and fined 40 individuals. The FIU is also monitoring bank services to detect illegal ZiG dealings.

A report indicated that the crackdown led to “a significant decline in the number of illegal money changers operating in the Central Business District (CBD) [of the capital Harare] and surrounding areas.” However, the ZRB’s X post on June 4 suggests that the struggle against illegal trading continues.

Coins Shortage and New Measures

Another issue troubling the central bank is a lack of coins. “The Bank particularly seeks to expand economy-wide availability of small change in the following denominations: ZiG1, ZiG2, ZiG5, ZiG10,” the RBZ stated in a subsequent X post. The RBZ also announced that ZiG cash would be available for withdrawal from the government-owned Homelink financial services company using debit cards in seven cities beginning on June 10, with other financial institutions to follow.

ZiG Receives Mixed Reviews

The ZiG is Zimbabwe’s sixth currency in 15 years. Backed by gold and foreign currency, it began as a digital currency tied to the price of gold and was introduced in physical form in April, receiving a mixed public response.

The gold-backed token, now referred to as the Gold-Backed Digital Token (GBDT), faced skepticism and criticism due to its resemblance to central bank digital currency. The GBDT now functions as an “investment instrument” separate from the physical ZiG. Despite the introduction of ZiG, several foreign currencies remain legal tender in Zimbabwe.

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