The South African Reserve Bank (SARB) announced that they are exploring the possibility of an official digital currency, a Central Bank Digital Currency (CBDC). SARB one step closer to own digital currency. Is this good news for South Africans or not?
SARB one step closer to own digital currency
The news of CBDC was delivered by senior fintech analyst Gerhard Van Deventer in Sandton on Wednesday, 28 August. Van Deventer said the proposed digital currency would be backed by the South African Rand (ZAR). It would also be used as legal tender.
Furthermore, he explained that CBDC can have two forms. First being wholesale followed by retail, making it “general-purpose”. The currency would, of course, be issued by the central bank and would be made available to the general public.
Van Deventer said the digital currency can be issued on a blockchain but this was still in the experimental phase. Apparently, there are some challenges with transaction throughput. However, the project is said to be discussed during a workshop that will take place early September.
What we know about SARB’s CBDC
On a previous occasion, the SARB published a tender notice saying that they would investigate the “feasibility and desirability of central bank-issued digital currency”. The document dated May 2019 said the currency would be used as electronic legal tender that compliments cash.
Thus far we know that the digital currency would only be issued by the SARB and is not intended to replace cash. Here are some other interesting facts:
- It will be issued at one-to-one parity with the ZAR
- Big and small business, as well as government, must accept CBDC as a form of payment
- It must not pose a risk of destabilizing the South African financial sector
- Policies will be put in place regarding the currency’s supply and movement
- One will not need a bank account to own or conduct business in CBDC
- Appropriate channels must be put in place so that consumers and businesses can exchange CBDC for cash and commercial bank money
- The digital currency must be traceable
- CBDC must enable immediate person-to-person transfer
In September 2018, the SARB won the Best Distributed Ledger Initiative award for its blockchain initiative. SARB’s Project Khokha is an Ethereum blockchain platform that is aimed at processing interbank payments and settlements. Read Bitmart’s blog “SA Reserve Bank wins award for blockchain initiative”.
China announces a state-backed cryptocurrency
Also making headlines this week is China’s central bank talking about launching a state-backed cryptocurrency. Apparently, the cryptocurrency is said to be issued to seven institutions in the coming months. They are the Industrial and Commercial Bank of China, the Bank of China, the Agricultural Bank of China, Alibaba, Tencent, and UnionPay. It is said the cryptocurrency could be launched on 11 November on China’s Singles Day. Singles Day is China’s busiest shopping day. During this time the recipients will be responsible for dispersing the token to 1.3 billion Chinese citizens.