Countries around the world are beginning to recognize the benefits of central bank digital currencies (CBDCs) and are looking to issue their own CBDCs so as to leverage these benefits such as reduced remittances costs as well as new job opportunities for citizens.
According to South African Reserve Bank (SARB) deputy governor, Kuben Naidoo, South Africa is eyeing a central bank digital currency in the long term. He opines that a digital rand could significantly cut down the cost of cross-border payments for banks. He, however, noted that the introduction of a digital rand is still a few years away. He also mentioned that the regulation of cryptocurrencies could come into place in the country within the next 9 to 15 months.
It takes 13 percent of a transaction to send money from South Africa to another country. Per a 2021 World Bank report, this is more than double the average of the Group of 20 (G20) leading economies. Sending money to South Africa, on the other hand, costs 6.2 percent.
If South Africa decides to introduce central bank digital currencies (CBDCs), it’ll be joining a growing list of countries across the world planning to do so. China’s digital yuan project remains the most advanced of all central bank digital currencies projects. A handful of other countries are advancing in their research stages.
Nigeria launched its own CBDC called the e-naira early last year with the hope of narrowing the financial inclusion gap and creating an easy and seamless system for foreign remittances. The e-Naira was developed alongside fintech company Bitt Inc. which is known for developing CBDCs.
On regulation, the deputy governor of South Africa’s apex bank said that the idea was to prevent theft, fraud, the risk to the country’s monetary policies, and money laundering. “If crypto-assets were to become a very ubiquitous currency, you could undermine the authority of the central bank,” he said.
The country has embarked on some experiments with a wholesale CBDC and took part in pilot testing centered on cross-border payments with the central banks of other countries such as Australia, Singapore, and Malaysia. The next step would be to test at a bigger scale and come up with regulations for its use. “We’re still learning, we’re still experimenting,” deputy governor Kuben Naidoo said.