South Africa Central Bank Puts Retail CBDC on Hold, Focuses on Payments Upgrade

South Africa’s central bank has dampened expectations surrounding the development of a retail central bank digital currency (CBDC). The South African Reserve Bank (SARB) believes there is no pressing need for such a currency at this time, opting instead to concentrate on enhancing the existing payments system.

Key Takeaways

South Africa's central bank has determined that a retail CBDC is not currently necessary and will prioritize improvements to the payments system.
The SARB will concentrate on the wholesale applications of digital currency and improving cross-border payment processes.
Officials have raised concerns that cryptocurrencies and stablecoins carry financial risks and could circumvent established exchange controls.

In a recent research paper, the South African Reserve Bank (SARB) outlined that while creating a consumer-oriented CBDC is technically feasible, it is not deemed essential in the immediate future.

South Africa Central Bank Shelves Retail CBDC, Backs Payments Upgrade Instead

SARB Shifts Focus: Payments Reforms Over Retail CBDC Development

The central bank emphasized that current initiatives aimed at refining the national payments framework—by enabling faster settlements and widening participation for non-bank entities—present a more viable approach to enhancing financial accessibility at this juncture.

“While the SARB does not currently advocate for the implementation of a retail CBDC, it will continue to monitor developments and will remain prepared to act should the need arise,” the report stated.

Instead of pursuing a digital rand for everyday transactions, the SARB plans to concentrate on more advanced uses for wholesale digital currencies, alongside efforts to enhance the efficiency of cross-border payment methods.

This decision reflects a belief that targeted upgrades to infrastructure could yield benefits sooner than a widespread consumer-focused rollout, which would necessitate new legal, technical, and operational frameworks.

Research conducted by SARB examined whether a retail CBDC could address certain inadequacies within the nation's payments network, yielding mixed findings.

Currently, approximately 16% of adults in South Africa do not have bank accounts; however, the bank noted that any digital currency would need to match or surpass cash in terms of essential features like offline accessibility, universal acceptance, user-friendliness, privacy, and affordability to make a substantial impact on this unbanked population.

As this paper was published, the central bank also issued fresh warnings regarding the potential risks associated with cryptocurrencies and stablecoins.

In a separate report this week, SARB identified the growing cryptocurrency sector as a concern for technology-driven finance. Officials cautioned that these digital assets might be used to navigate around the country's exchange controls, which govern capital movement.

Worldwide, the adoption of CBDCs varies significantly. As of now, only three countries—Nigeria, Jamaica, and The Bahamas—have successfully launched their digital currencies. Numerous others are either testing prototypes or remain in development and research stages, as tracked by the Atlantic Council.

U.S. Decision to Halt CBDC Efforts Amid New Crypto Legislation

In contrast, the United States seems to be pressing pause on its CBDC initiatives, influenced by the actions taken during the Trump administration.

In July, the U.S. House of Representatives narrowly passed a significant procedural vote, paving the way for decisions on three major cryptocurrency bills: the GENIUS stablecoin bill, the CLARITY Act, and the Anti-CBDC Surveillance State Act.

In September, House Republicans took steps to tie the bill, which would forbid the Federal Reserve from establishing a CBDC, to the CLARITY Act.

However, the CLARITY Act has yet to be signed into law and is still under consideration in the Senate. Before it can take effect, the bill must pass both the Senate and the House, followed by presidential approval.