Central Bank's Stance on Digital Currency

The South African Reserve Bank (SARB) has indicated that it does not foresee an immediate need for a central bank digital currency (CBDC) in South Africa. Instead, the bank advocates for the modernization of the country's existing payments system. In a paper released on Thursday, the SARB stated that while the deployment of a retail CBDC is technically feasible, there is no strong immediate requirement for it.

Current Priorities and Future Exploration

The central bank emphasized that current initiatives, such as the ongoing program to modernize the payments system and broaden non-bank participation in the national payment system, should remain the primary focus. Moving forward, the SARB plans to shift its attention towards exploring wholesale CBDC applications and enhancing cross-border payment efficiency. The bank will also continue to monitor developments in the retail CBDC space globally.

Addressing Gaps in the Payment System

The research conducted by the SARB examined whether a retail CBDC could effectively address existing gaps within South Africa's payment system. The findings revealed that challenges persist, with approximately 16% of adults in the country remaining unbanked. For any CBDC to be successful, it would need to offer benefits that match or surpass those of cash, including offline functionality, universal acceptance, low transaction costs, ease of use, and robust privacy features.

Recent Warnings on Crypto and Stablecoins

South Africa has recently expressed caution regarding cryptocurrencies. The central bank issued a warning about crypto assets and stablecoins in a report released earlier this week, identifying them as a new risk associated with technology-enabled financial innovation. The SARB also cautioned that cryptocurrencies could potentially be used to circumvent Exchange Control Regulations. These regulations are in place to manage the inflows and outflows of funds into and out of South Africa, aiming to maintain financial stability and prevent capital flight from the country's economy.

Global CBDC Landscape

Globally, only a limited number of countries have officially launched a CBDC. According to the Atlantic Council CBDC Tracker, Nigeria, Jamaica, and the Bahamas are among those that have done so. Currently, 49 countries are in a pilot testing phase for their CBDCs, 20 countries are actively developing one, and an additional 36 countries are in the research phase for a CBDC. For context, the United States shelved its CBDC plans under the Trump administration.

Future Preparedness and Continued Focus

The South African Reserve Bank affirmed its commitment to remaining prepared to act should the need for a retail CBDC arise in the future. However, its current strategic focus remains firmly on improving the existing payment infrastructure and addressing financial inclusion through the expansion of traditional banking services.