The South African Reserve Bank has unveiled a roadmap for digital payments as part of its Vision 2025, which was published six years ago. The report highlighted the slow adoption of digital payment technologies in the country and outlined plans to catch up with the vision, including the introduction of cryptocurrency and central bank digital currency (CBDC).
Although South Africa’s financial services sector, particularly banking, is well-developed, the report found that lower and middle-income South Africans still heavily rely on cash despite advancements in digital payment technology. This is due to factors such as user costs, low financial literacy, limited accessibility, and lack of trust.
The roadmap aims to enhance the accessibility of financial technology, modernize payment infrastructure, and remove barriers to usage. It focuses solely on domestic plans and does not extend to international initiatives.
In South Africa, crypto assets are not considered legal tender but are also not prohibited. For instance, Pick n Pay, a local retailer, accepts Bitcoin as payment at over 1,600 locations. The SARB is looking at global best practices for regulation and is open to exploring the use of distributed ledger technology.
The SARB has established a two-year sandbox for the integration of cryptocurrencies into the South African financial system, including the licensing of exchanges. Similarly, the SARB has launched a study on retail CBDC in 2021, as CBDC has the potential for more cost-effective and real-time online and offline peer-to-peer digital payments. The roadmap recommends further exploration of both retail and wholesale CBDC over the next two years.
Tokenization, which offers enhanced security, faces regulatory obstacles in South Africa. The SARB acknowledges the benefits of tokenization but is closely monitoring its growth.
In conclusion, the South African Reserve Bank’s digital payments roadmap aims to address the slow adoption of digital payment technologies in the country. Through the introduction of cryptocurrency, CBDC, and other measures, the SARB hopes to enhance accessibility, modernize infrastructure, and overcome barriers to usage.