By Thulani Mpofu
South Africa’s central bank has initiated studies to explore the feasibility of permitting fiat-backed stable coins to undergo testing within a regulatory sandbox environment over two years.
The initiative, Paypers reported on April 23, is part of a roadmap outlining strategies for leveraging cryptocurrency and central bank digital currency (CBDC) technologies to enhance financial inclusion and reinforce the foundation of the payment system in the continent’s most industrialised economy.
Furthermore, the South African Reserve Bank (SARB) “continues to delve into research on retail CBDCs, recognising their potential to facilitate cheaper and faster fund transfers for retail transactions. The roadmap also tackles the challenges associated with tokenization, which involves converting assets into digital tokens, by outlining a regulatory approach to govern this process.”
In 2018, the central bank completed Project Khokha 1, which was a proof-of-concept project designed to simulate a “real world” trial of a distributed ledger technology (DLT)-based wholesale payment system. The project, the Paypers reported, focused on providing participants with practical experience on aspects of using DLT in a realistic test environment where different deployment models were utilised.
The findings indicated that the typical daily volume of South Africa’s payment settlement system could be processed and settled in less than two hours with full confidentiality of transactions and settlement finality.
This ongoing study could stimulate interest in cryptocurrencies among the populace but also underscores the need for a regulatory framework ahead of their widespread adoption.
