South Africa Now Looking to Upgrade From a Wholesale to a Retail CBDC

The South Africa Reserve Bank (SARB) is studying the use of CBDC in retail payment in order to study the feasibility, appropriateness, and desirability of a retail CBDC.

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The South Africa Reserve Bank (SARB) is studying the use of CBDC in retail payments. This is based on a quote attributed to the bank’s governor, Lesetja Kganyago, at the bank’s latest annual general meeting (AGM).

The objective of the study is to investigate if it would be feasible, appropriate, and desirable, for the SARB to issue a CBDC to be used for retail purposes, complementary to cash, in South Africa.

As per the latest PwC Global CBDC Index 2021 report South Africa is already well ahead when it comes to inter-bank CBDC development, ranked top in Africa and 7th worldwide.

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SEE ALSOThe Central Bank of Nigeria Reportedly Plans to Launch the CBDC ‘GIANT’ Pilot by October 2021 on Hyper-Ledger Fabric Blockchain

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Indeed, since 2017, SARB has been working on Project Khokha which looks to issue, clear and settle debentures on DLT using tokenized money built as a minimum viable product to further explore policy and regulatory considerations.

The project seeks to enable users purchase debentures with a wholesale Central Bank-issued digital currency (wCBDC) and a wholesale digital settlement token (wToken), a privately-issued stable coin used for interbank settlement.

But the country lags behind when it comes to retail CBDCs, which are being implemented in many emerging economies to boost financial inclusion.

In May 2021, the bank reportedly published a tender notice, which revealed its plans for a retail CBDC.

Some of the features of the CBDC were indicated as:

  • The e-Rand be issued as legal tender by the SARB only
  • It must be unique in its design, and its SARB ownership must be evident
  • Must be issued at one-to-one parity with the Rand
  • Must be ubiquitous and accepted as a means of payment by all businesses and government
  • It must not introduce the risk of destabilizing the financial sector
  • Mechanisms must be incorporated to give effect to policy decisions regarding its supply and movement
  • Consumers must be able to own and transact in the e-Rand without the need for a bank account
  • Consumers and businesses must be provided with the channels to obtain or return e-Rand in exchange for cash and commercial bank money
  • It must enable the immediate person-to-person transfer of value without clearing and settlement in today’s terms
  • The e-Rand must be traceable
  • The e-Rand must be auditable in terms of proof of issuance and ownership

Besides South Africa, many other Central banks in Africa are studying CBDCs for use to boost financial inclusion with Nigeria and Ghana already in the implementation and pilot phases.

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RECOMMENDED READING: South Africa Regulatory Body, IFWG, Highlights the Potential Benefits and Risks of Tokenisation

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