South Africa’s Central Bank Rules Out Any Immediate Push for a CBDC

Highlights:

• South Africa will not be rolling out its CBDC anytime soon
• The SARB prefers to prioritize familiar payment options.
•  Despite ruling out an immediate CBDC launch, the Central Bank said it remains a long-term possibility.

South Africa’s Central Bank, also known as the South African Reserve Bank (SARB), has made it clear that it has no plans to launch a retail Central Bank Digital Currency (CBDC), commonly referred to as the Digital Rand. The decision stems from several years of research, tests, and talks with industry leaders. 

The announcement comes just days after the SARB warned about the risks of widespread stablecoin adoption in South Africa. In one of its reports, the Central Bank stated that the current trend could distort the nation’s financial system. It also warned that the borderless nature of digital assets could pose new challenges for regulators. 

Central Bank to Focus on Upgrading Existing Payment Systems

The paper acknowledges that a retail CBDC is technically feasible and has performed well in testing. However, the Central Bank believes that South Africa should focus on improving available payment tools.

For context, the country has already developed rapidly growing digital payment options, including PayShap, cards, mobile money, QR payments, and online transfers. These systems are expanding across cities, townships, and rural areas in South Africa. Therefore, upgrading them will be ideal for the nation’s financial outlook.

South Africa’s Central Bank also argued that cash remains indispensable in the country’s economy. Millions of South Africans still depend on cash for everyday transactions due to unstable network coverage, electricity challenges, high bank charges, and a lack of trust in digital platforms. 

In addition, the SARB noted that countries that launched CBDCs experienced low adoption rates. This is because consumers and merchants preferred familiar payment options due to a poor understanding of the system. Overall, the Central Bank emphasized that launching a CBDC without strong demand will create more confusion than progress. 

CBDC Remains a Future Possibility

Currently, South Africa is working on several projects that solve real-world payment problems. The nation is expanding its PayShap and improving its QR standards, including digital identity and verification. Additionally, it is developing open banking rules and also bringing fintechs and non-banks into the payment system. 

Despite ruling out an immediate need for a CBDC, the SARB agrees that it might be useful in the future. “While the SARB does not currently advocate for the implementation of a retail CBDC, it will continue to monitor developments and will remain prepared to act should the need arise,” SARB stated.

The Central Bank believes that the CBDC could help protect public access to central bank money in a digital economy. The Digital Rand also supports digital payment tools and permits direct transfers from the government to citizens. Additionally, CBDC supports innovations, including smart contract payments and tokenized assets. 

Despite rising cryptocurrencies and stablecoins adoption, the Central Bank maintains that it does not justify the urgency to launch a Digital Rand. Meanwhile, while retail CBDC remains on hold, the SARB is focusing on wholesale CBDC, used between banks to improve settlements and hasten cross-border payments.

Possibilities of Launching a CBDC Soar Across Countries

Per the Atlantic Council CBDC tracker, 137 countries and currency unions are exploring a CBDC rollout, representing a remarkable surge from the 35 recorded in May 2020. Currently, 49 countries’ CBDCs are in the pilot testing phase. 20 nations have advanced in their CBDC development. Meanwhile, the United States will not be advancing its CBDC plans under the Donald Trump-led administration. 

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