South Africa’s digital payments roadmap includes CBDC, stablecoins

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The South African Reserve Bank (SARB) has published its digital payments roadmap, with stablecoins, a retail central bank digital currency (CBDC), and tokenization among its priorities.

The roadmap is designed to realize the goals of SARB’s National Payment System Framework and Strategy: Vision 2025. This includes financial inclusion, delivering cost-effective payments, interoperability, and promoting innovation and competition.

South Africa has a high financial inclusion rate, with 82% of the adult population having access to a bank account. However, over 70% of them use the account once a month, with high fees, cash-use preference, and lack of money among the contributing factors.

This makes promoting digital payments a crucial agenda for the top bank. One solution it’s exploring is a digital rand. In May 2021, it embarked on a feasibility study for a retail CBDC, exploring how it would affect payments, monetary policy, and other aspects of the financial services sector.

In its roadmap, the SARB pledged to continue this exploration for the next two years, testing “the feasibility of digitising money/cash through the issuance of retail CBDCs and use cases for a wholesale CBDC.”

Digital assets are also crucial to the SARB’s goals. South Africa has been one of the continent’s top digital currency hubs alongside Nigeria and Kenya, with Centbee’s innovative onboarding leading the way and offering direct digital currency payments for utilities, groceries, taxi-hailing services and more.

The central bank noted that while digital assets are not legal tender, it has not banned them for payment purposes.

Additionally, the bank is open to allowing stablecoins into its regulatory sandbox.

“The sandbox approach would provide the SARB with an opportunity to understand and assess payment use cases in the short term as well as their potential for enhancing the adoption and use of digital payments, which process may assist in developing a regulatory, supervisory and oversight framework for crypto-based payments,” it stated.

The SARB is working on a regulatory approach to digital assets, guided by the Financial Stability Board’s (FSB) recommendations. However, the country’s Financial Sector Conduct Authority (FSCA) has taken the lead on digital asset regulation. Recently, the FSCA issued its first batch of VASP licenses to exchanges such as VALR and Luno.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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