Reserve Bank explains plans for a South African digital currency

The South African Reserve Bank (SARB) is currently investigating the possibility of a digital currency backed by the rand, and hopes to experiment with at least three different designs and/or deployment models during 2019.

Speaking to BusinessTech, the SARB said that it is in the process of engaging with possible vendors to explore the feasibility of a central bank digital currency (CBDC) as electronic legal tender (ELT).

“Rapid technological changes have prompted major central banks across the globe to consider electronic forms of cash,” it said.

“Since late 2016, SARB’s Currency Management Department has conducted extensive research to understand the case for such an electronic form of cash, called electronic legal tender (ELT).

“This would be a domestic, general purpose central bank digital currency (CBDC), issued and backed by the SARB.”

The SARB said that it does not presently have a formal position on the feasibility of issuing an ELT, however, it is proactively seeking to understand the policy and other implications of issuing one.

It said that the research conducted to date focused primarily on developing an understanding of the various forms of public and private virtual currencies, as well as the potential implications should a central bank decide to issue a general purpose CBDC.

“The next phase will be practical hands-on experimentation of potential design models in an innovation lab (sandpit) environment by considering available emerging technologies as well as security and risk management aspects,” it said,

“The SARB project team has documented a number of use cases for testing purposes, and is now in the process of identifying vendors to participate in the innovation lab experimentation.

“Final outcomes from the experimentation will be used as input to determine the SARB’s position on CBDC as ELT,” it said.

Read: Reserve Bank wants to test a digital currency backed by the rand