South Africa’s Central Bank Sees ‘No Urgent Need’ for a CBDC
later than years of research, pilots, and discussions with industry players, the South African Reserve Bank (SARB) South Africa does not have a “strong immediate need” for a retail central bank digital currency (CBDC).
The central bank said in a new position paper that development of a retail CBDC will be put on hold for now while policymakers focus on strengthening and making the national payment system more accessible by allowing non-bank participation.
The SARB said its tests demonstrated that a retail is technically feasible and could be implemented in a way that meets South Africa’s regulatory and policy goals.
The analysis showed, nonetheless, that ongoing changes may address current priorities in payment infrastructure and financial inclusion without the need to make a digital Rand available to the public right away.
Not Ruling Out A Future Role For A Retail CBDC
The SARB made it clear that its position should not be viewn as a rejection of a retail CBDC in the long run, even though it was on hold. The paper says that a digital central bank money instrument might be needed in the future to keep central bank money available to the public as a public excellent and to support new ideas in ‘s payment system.
The central bank also stressed that any potential retail CBDC would need to offer at least the identical benefits as cash, such as working offline, being accepted everywhere, being simple to use, being cheap, and providing robust privacy protections.
Policymakers said that these design standards remain an significant way to assess whether and how a retail CBDC should be launched in the future.
Change of Focus to Wholesale CBDC Use Cases
The SARB will now focus its digital currency work on wholesale CBDC pilots and research instead of retail CBDC operations. The bank wants to explore how wholesale CBDCs could enable quicker settlements, support new ideas, and make cross-border payments easier.
The study says that further research into wholesale CBDC architectures will assist us better understand interoperability and programmability.
This could assist us decide on a retail CBDC in the future. This puts South Africa in line with a broader global trend in which many places are experimenting with wholesale CBDC models alongside, or instead of, consumer-facing ones.
Increased Risks for Stablecoins and Cryptocurrencies
The SARB’s position paper and other statements also show that people are becoming more worried about how rapidly stablecoins and cryptocurrencies are spreading in South Africa.
The central bank says South Africa is among many countries exploring CBDC options, citing data from the Atlantic Council’s CBDC Tracker. It also says that just a few countries, such as Nigeria, Jamaica, and The Bahamas, have launched live CBDCs and have viewn only limited use so far.
By October, the volume of stablecoin trade in South Africa had risen to about 80 billion rand ($4.6 billion), up sharply from less than 4 billion rand in 2022. The SARB cautions that this increase might put the financial system at great danger if it is not controlled.
The central bank and are working on new rules to put crypto assets and cross-border flows under formal control. The Financial Sector Conduct Authority has also begined giving licenses to crypto platforms and service providers, but a single set of rules has not yet been agreed upon.
