South African Reserve Bank’s Stance on CBDC
The South African Reserve Bank (SARB) has recently announced that it does not deem it necessary to develop a central bank digital currency (CBDC) in the immediate future. Instead, the bank emphasizes the importance of enhancing the current payments system within the country. In a detailed paper published on Thursday, the SARB stated that there is no pressing need for a retail CBDC at this time, though it acknowledged that implementing one is technically possible.
Focus on Current Payment Systems
According to the bank, current projects aimed at modernizing the payments landscape and allowing more participation from non-banking entities should take precedence. The SARB indicated its commitment to monitoring the situation and remains ready to make adjustments should the need for a retail CBDC arise.
Wholesale CBDCs and Cross-Border Transactions
In a shift of focus, the central bank plans to concentrate on the potential applications of wholesale CBDCs and improving the efficiency of cross-border transactions, while still keeping an eye on retail CBDC trends.
Financial Inclusion Challenges
The research conducted by the bank evaluated whether introducing a retail CBDC would solve existing issues within South Africa’s transaction systems. It found that a significant portion of the adult population—approximately 16%—is unbanked, highlighting ongoing challenges in financial inclusion. The report stresses that any successful CBDC must offer advantages comparable to cash, including features such as offline operation, broad acceptance, low fees, user-friendliness, and privacy safeguards.
Warnings on Cryptocurrency and Stablecoins
In the backdrop of this CBDC discussion, the SARB has also issued warnings regarding cryptocurrency and stablecoins, highlighting them as emerging risks in the realm of technology-driven financial innovation. This warning coincides with a report published earlier in the week that pointed out potential vulnerabilities in the country’s Exchange Control Regulations, which manage the flow of capital into and out of South Africa.
Global CBDC Developments
Globally, the race for developing CBDCs continues, with only three nations—Nigeria, Jamaica, and The Bahamas—having officially launched their own digital currencies, according to the Atlantic Council’s CBDC Tracker. Currently, there are 49 countries testing CBDCs in pilot programs, 20 nations working on development, and 36 engaged in research. Notably, the United States has paused its CBDC initiatives under the previous administration.
