The South African Reserve Bank (SARB) is making steady progress in its investigations around a central bank digital currency, says deputy governor Kuben Naidoo.
Speaking in PSG’s latest Think Big webinar, Naidoo said the SARB is intimately involved with ‘Project Dunbar’ – an initiative that brings together the Reserve Bank of Australia, the Central Bank of Malaysia, the Monetary Authority of Singapore and the South African Reserve Bank for a cross border central bank digital currency.
Naidoo said the SARB’s aim is to improve the efficiency of the local payment system – bringing down costs and the time that it takes to clear and settle in the payment system. He predicts that a central bank digital currency would most likely be used for cross-border payments, either for goods and services or remittances, but this will take ‘several years before it becomes a reality.”
The South African Reserve Bank has previously tested a digital currency for local use as part of its Project Khoka programme, which looked at using blockchain technology to speed up payment systems in the country.
The rapid growth of cryptocurrencies – which are distinct from digital currencies issued by central banks – is posing a potential threat to existing monetary regimes and adding urgency to debates on handling cross-border money transfers.
Speaking on the projects in April, SARB governor Lesetja Kganyago said that digital currency innovation cannot be explored in isolation.
“The SARB continues to draw on the insights emerging from various initiatives, including (but not limited to) our ongoing study into the feasibility, desirability and appropriateness of a retail central bank digital currency (CBDC), to enrich our understanding of digital currency implications.”
He added that the Reserve Bank’s experimentation during Project Khokha 2, saw the central bank develop two forms of tokenised money to allow for settlement:
The first form of money was a tokenised form of central bank money which was a liability of the central bank issued onto a specific DLT owned and operated by the SARB in the PoC. This form of money was used to purchase SARB debentures in the primary market.
The second form of money was issued by commercial banks as a stablecoin and used for purchasing SARB debentures in the secondary market.
“The insights gained through practical exploration should lead to greater regulatory clarity – both for innovators and for regulators – and should be in the broader interest of ensuring a level playing field for all market participants,” Kganyago said.
Regulators should move with caution when considering developments before amending rules and should be ‘fully appreciative’ that regulated entities need clarity to commit to distributed-ledger markets, he said.-bustech
