South Africa’s central bank (SARB) has revealed a roadmap that would improve the country’s adoption of digital payment technologies. The roadmap outlines strategies for leveraging cryptocurrency and Central Bank Digital Currency (CBDC) technology to enhance financial inclusion and reinforce the foundation of the payment system.

As part of this initiative, the central bank has initiated studies to explore the feasibility of permitting fiat-backed stablecoins to undergo testing within a regulatory sandbox environment for a two-year period. This move could potentially stimulate interest in cryptocurrency among the populace. However, it also underscores the imperative need for regulatory frameworks to precede widespread adoption.

Furthermore, SARB continues to delve into research on retail CBDCs, recognising their potential to facilitate cheaper and faster fund transfers for retail transactions. The roadmap also tackles the challenges associated with tokenization, which involves converting assets into digital tokens, by outlining a regulatory approach to govern this process. CBDC projects According to the Digital Payments Roadmap report, the SARB participated in Project Dunbar with the Bank for International Settlements Innovation Hub, the Reserve Bank of Australia, Bank Negara Malaysia and the Monetary Authority of Singapore.

The project, which was successfully completed in March 2022, was a prototype of a common platform that could be established to enable cross-border payment settlement using multiple CBDCs (mCBDCs). Project Dunbar proved that financial institutions could use CBDCs issued by participating central banks to transact directly with each other digitally on a shared platform, to reduce cost and increase the speed of processing of cross-border transactions. Moreover, in 2018 the SARB completed Project Khokha 1, which was a proof-of-concept project designed to simulate a ‘real world’ trial of a distributed ledger technology (DLT)- based wholesale payment system.

The project focused on providing participants with practical experience on aspects of using DLT in a realistic test environment where different deployment models were utilised. The findings indicated that the typical daily volume of the SA payment settlement system could be processed and settled in less than two hours with full confidentiality of transactions and settlement finality. .