South African Reserve Bank Eyes Digital Payments Boost with New Roadmap
Summary:
The South African Reserve Bank (SARB) has unveiled a digital payments roadmap to expedite its Vision 2025 strategy. Despite a robust banking sector, adoption of digital payment technologies in South Africa has been slow, primarily amongst lower and middle-income citizens. The roadmap outlines strategies to overcome user cost, accessibility, and trust-related barriers. It considers the potential of cryptocurrencies and central bank digital currencies (CBDCs). The SARB is open to leveraging international regulatory frameworks and is exploring tokenization despite potential regulatory challenges.
Six years ago, the South African Reserve Bank (SARB) set forth its Vision 2025, outlining a strategy for the adoption of digital payments. Despite these plans, progress has been slower than anticipated. The bank's newly released digital payments roadmap examines how the nation can better align with these objectives, and incorporates plans to embrace cryptocurrency and central bank digital currencies (CBDC).
While the country's financial services sector, particularly banking, is advanced, the uptake of digital payment technologies has been lukewarm. Many South Africans, especially those in lower and middle-income brackets, continue to rely heavily on cash transactions. The report attributes this trend to several barriers including user costs, financial literacy levels, limited accessibility, and a general lack of trust.
The bank's roadmap includes strategies to improve financial technology accessibility, modernise payment infrastructure, and minimize usage obstacles. Notably, these plans are strictly within the domestic context.
Despite not being recognised as legal tender, cryptocurrencies are not prohibited in South Africa. For instance, retail giant Pick n Pay accepts Bitcoin transactions at over 1,600 outlets. The SARB is open to adopting successful international regulatory frameworks and embracing distributed ledger technology.
Even before concrete regulations are put in place, the SARB is willing to allow the use of eligible stablecoins for domestic payments within a regulatory sandbox, with a proposed timeline of two years. The integration of cryptocurrencies into the South African monetary system also includes the licensing of exchanges.
The concept of CBDCs is under similar consideration. In 2021, the SARB initiated a study to explore the potential benefits of retail CBDCs, particularly their cost-effectiveness and ability to facilitate real-time digital payments, both online and offline. The bank's roadmap proposes a two-year exploration of retail and wholesale CBDCs.
However, regulatory hurdles persist. While tokenization offers enhanced security benefits, existing regulations may not adequately cover tokenized use cases. This could potentially create risks within the payment ecosystem due to underregulation or non-regulation. The SARB is actively tracking the technology's evolution to mitigate risks.
Cape Town, given its status as a digital-nomad and crypto hub, is particularly critical to South Africa's digital payment roadmap.
Published At
4/22/2024 9:48:36 PM
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