South African Reserve Bank Evaluates CBDC Necessity Amid Payment System Modernization

According to Cointelegraph, the South African Reserve Bank (SARB) has expressed that there is no immediate requirement for a central bank digital currency (CBDC) in the near term, emphasizing the need to modernize the country's payment system instead. In a paper released on Thursday, the central bank stated that while deploying a retail CBDC is technically feasible, there is no "strong immediate need" for it. The SARB highlighted existing initiatives aimed at modernizing the payments system and expanding non-bank participation in the national payment system as current priorities. The SARB clarified that although it does not currently advocate for the implementation of a retail CBDC, it remains vigilant in monitoring developments and is prepared to act if necessary. The central bank plans to shift its focus towards exploring wholesale CBDC applications and enhancing cross-border payment efficiency, while continuing to observe retail CBDC advancements. The research conducted by the SARB examined whether a retail CBDC could address existing gaps in South Africa's payment system, noting that challenges persist with approximately 16% of adults remaining unbanked. For a CBDC to be successful, it would need to offer benefits that match or exceed those of cash, including offline functionality, universal acceptance, low costs, ease of use, and privacy features. The SARB also issued a warning regarding crypto and stablecoins, identifying them as potential financial risks. In a report released earlier this week, the central bank flagged "crypto assets and stablecoins" as a new risk associated with technology-enabled financial innovation. Additionally, the bank cautioned that cryptocurrencies could be used to circumvent Exchange Control Regulations, which manage the inflows and outflows of funds to South Africa. Globally, the race to develop CBDCs continues, with only three countries—Nigeria, Jamaica, and The Bahamas—having officially launched a CBDC, according to the Atlantic Council CBDC Tracker. Currently, 49 countries are in the pilot testing phase, 20 countries are actively developing one, and 36 countries are researching a CBDC. Meanwhile, the United States has shelved its CBDC plans under the Trump administration, as the global pursuit of CBDCs persists.