A digital rand in South Africa could cut the high cost of cross-border payments for banks, says Juben Naidoo, deputy governor at the South African Reserve Bank (SARB).
Speaking to Reuters, Naidoo said that the introduction of a digital rand is at least a few years away, but he hopes the regulation of crypto assets in South Africa will be in place within the next 15 months, to help prevent theft, money laundering, and the undermining of monetary policy.
“If crypto-assets were to become a very ubiquitous currency, you could undermine the central bank’s authority,” he said.
In April, the governor of the Reserve Bank, Letsetja Kganyago, called on regulators to err on the side of caution when considering crypto-related developments before amending rules.
Many countries have plans to use digital versions of traditional currency, known as central bank digital currencies (CBDCs), to make sending money between central banks across the globe more accessible and affordable.
According to a recent World Bank report, South Africa remains the most costly G20 country to send payments from. Remitting from the country costs an extra 13.02%. The report stated that sending from Japan, the second most expensive G20 country, was only 7.52% in Q4 2021.
The government is actively experimenting with digital currency through Project Khokha 2 which aims to explore the use of tokenised money, blockchains and digital currency in South Africa.
Absa, FirstRand, Investec, the JSE, Nedbank and Standard Bank are all part of Project Khokha 2, testing blockchain technology to speed up payment systems in the country.
“We recognise that digital currency innovation cannot be explored in isolation. The SARB continues to draw on the insights emerging from various initiatives, including – but not limited to – our ongoing study into the feasibility, desirability and appropriateness of a retail central bank digital currency (CBDC) to enrich our understanding of digital currency implications,” said Kganyago.
Naidoo pointed out that South Africa has conducted a small cross-border pilot experiment with other countries, namely: Malaysia, Australia and Singapore.
Other countries are also planning to introduce e-versions of traditional currency, said Naidoo.
“China’s digital yuan project is the most advanced among large economies, through central banks from the eurozone to the United States are varying stages of research into CBDCs.”
Last year, Nigeria became the first African nation to launch a digital currency when its central bank introduced the eNaira for use by the average consumer.
According to Reuters, the move by Nigeria was to expand access to banking, enable more remittances and grow the economy.