The South African Reserve Bank published a position paper on retail CBDC, concluding that there is no immediate need for one, following its latest experimentation where it proved the technical feasibility. However, it hasn’t ruled out issuing one in the longer term. For now the central bank will pivot to focus on wholesale CBDC work to enhance “financial market innovation, cross-border payment efficiency and systemic resilience”.
Two primary factors led to the retail CBDC conclusion. The first is a preference to focus on current digital payment initiatives designed to fill gaps. Although cash remains a dominant payment mode, digital payments have expanded rapidly in South Africa, particularly since COVID. A retail CBDC might address unmet needs such as improving financial inclusion, providing interoperability between private payment systems, and empowering non-bank payment providers.
So far digital payment expansion has been led by the private sector, including banks, fintechs and payment providers. Nonetheless, the existence of gaps is reflected by the 16% unbanked adult population. The central bank introduced an upgraded faster payment system, PayShap. It is also working on various initiatives or components for its National Payment System, which should help address some of the unfulfilled needs. Hence, SARB would prefer to focus on this work, rather than a retail CBDC in the near term.
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