BusinessTech
The South African Reserve Bank (SARB), in collaboration with other Sub-Saharan African central banks, are mulling the potential use of central bank digital currencies (CBDCs) to improve payment systems in the region.
The Financial Stability Board (FSB) Regional Consultative Group for Sub-Saharan Africa met in Kenya to discuss local and regional economic and financial market challenges as well as progress in strengthening arrangements for crisis preparedness and management.
Prioritisation was given to the FSB’s Roadmap, which aims to enhance cross-border payments by improving cost, speed, access and transparency.
The FSB has made it a goal to modernise how the region transacts by seeking to address the developing need for widespread application of the new payment system, evolving possible legal implications and standards of data exchange and messaging.
“The group discussed initiatives to enhance cross-border payments in the region, including the potential use of central bank digital currencies for cross-border payments while noting the importance of compliance with anti-money laundering and combating the financing of terrorism standards,” said the SARB.
Use of digital currencies for cross-border payments is not a new topic for central banks as it can make sending money between central banks across the globe more accessible and affordable.
South Africa is also one of the most costly G20 countries to send payments from, with remitting costing roughly 7% more when compared to the average across countries such as Australia, the UK and Canada. The SARB itself has been trialling and actively investigating the use of digital currency for years.
In April, the SARB governor, Lesetja Kganyago said that the bank was experimenting with digital currency and distributed-ledger technology. The new ledger technology tracks transactions in real-time with greater transparency and is commonly used by blockchain-based currencies.
Project Khoka 2, initiated by SARB, aimed to explore the use of tokenised money, blockchains and digital currency in South Africa and saw the SARB develop two new forms of money:
In July, the deputy governor of the SARB Kuben Naidoo, said that South Africa is now in the process of another project to trial central bank digital currencies.
Naidoo said that the Reserve Bank, under ‘Project Dunbar’, is investigating the use of a digital currency with the Reserve Bank of Australia, the Monetary Authority of Singapore and the Central Bank of Malaysia.
Naidoo noted that CBDCs would likely be used for cross-border payments, either for services and goods or remittances – but this will take ‘several years before it becomes a reality.’
Crypto asset regulation
On 19 October, South Africa’s Financial Sector Conduct Authority (FSCA) ruled that crypto assets were to be treated as financial products in South Africa – making it easier for regulators to manage the currency.
The statement came amid global efforts by governments to regulate cryptocurrencies in order to shield users from risky virtual currencies and scammers. US legislators and authorities are looking for measures to control how stablecoins operate.
Marius Reitz, the general manager for Africa at crypto platform Luno, said that the new determination includes a licensing requirement that will drive high standards in the industry, particularly in relation to consumer protection, with potential investors easily able to identify those providers that satisfy regulatory requirements.
Read: Good news for diesel prices in South Africa
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