South African Reserve Bank (SARB) is set to conduct a feasibility study on the issuance of a Central Bank Digital Currency (CBDC).
According to a tender notice released by the SARB, the Bank seeks bids from private companies to offer technological infrastructure and skills for the digital currency project.
The CBDC project study aims to “investigate the feasibility and desirability of central bank issued digital currency to be used as electronic legal tender, complimentary to cash.” The project also seeks to find out how issuing a CBDC can serve the economic well-being of South Africans through price and financial stability.
Though for exploratory purposes at this time, the CBDC project will be carried out in two phases. The first phase will involve internal testing of principles, validation of feasibility for recommended technical solutions and increasing the body of knowledge.
A second phase will involve an extension of participation to external banks, mobile network operators and payment service providers. Here, the set of use cases will be increased to incorporate a full value chain so as to establish the possibility of the solution to satisfy SARB’s objectives.
Snippets of the SARB CBDC policies posit the following:
- Only SARB must issue the CBDC as legal tender
- CBDC transactions must be free or low cost to consumers when compared to the cost of cash
- SARB will issue and distribute CBDC under regulatory oversight to commercial banks
- CBDC must be accepted as a means of payment by all businesses and the government
- Consumers must be able to make transactions with CBDC without the need for a bank account…among other policies.
Plans for the CBDC project come in the aftermath of SARB’s blockchain-based project Khokha; and on completion, the institution will decide on the next steps to take in line with the outcomes of both test projects.
Considering the success and adoption of the CBDC, SARB will join an elite list of global banks looking to launch digital currencies (cryptocurrencies); and may become the first in Africa to do so.
Did you know? South Africa still maintains a top 10 spot on the global rankings for daily bitcoin trading volume and also among the Top 3 in Africa.
