SARB moves sizable sums across SADC 

By Bahle Gama

A trial looking at the use of central bank digital currencies (CBDCs) in cross-border transactions has seen the South African Reserve Bank (SARB) being able to move sizable sums of money among Southern African Development Community (SADC) member states.

In a statement, SARB Governor Lesetja Kganyago stated that significant difficulties arose when each country wanted to settle the transaction in its own currency.

Conversations around CBDCs have reportedly intensified in recent years in South Africa where the cost of cross-border payments is particularly prohibitively expensive and potential solutions continue to be sought.

The governor stated that trials conducted in the CBDC sector indicate that payments, particularly those made across borders, will move more quickly and the current system is bloated and hamstrung by incumbency.

“Making small payments across borders is (currently) very difficult. When moving USD 100.00 across borders, for instance, it might only be worth USD 60.00 after it reaches its destination and the transaction is completed,” he said.

He further stated that SARB was still looking into testing CBDCs, but is focusing on a solid use case and is not in a rush to be among global pioneers of the new take on national currencies.

According to BusinessTech, during a panel discussion held at the annual World Economic Forum (WEF) that was on January 18 in Davos, Switzerland, the governor said that South Africa would be very fast followers in terms of the creation and use of central bank currencies, drawing lessons from other nations that are further along in the experiment.

He stated that a crucial step toward the SARB’s modernization agenda is the decision to acknowledge and prepare it for digital currencies, adding that because a digital economy is emerging, central banks must reframe their functions globally.

“The central bank of a nation issues and manages a CBDC, which is a digital replica of the fiat currency of that nation. They can be utilised for cashless transactions, boosting financial inclusion, and offering central banks a fresh method for implementing monetary policy,” he said.

Elaborating further, Kganyago said the use case of the new technology is still the subject of discussion and research. Nevertheless, he emphasized the potential of CBDCs in making national payments more efficient and helping to deal with domestic market frailties better.

“The SARB is one of many central banks that believe the economy is changing, though there’s a recognition that demand must also be taken into account,” he said.

He stated that there is a need for national conversations about the role of the new system, and big issues about regulation and governance need to be discussed alongside the need for public choice. He reportedly informed the panel that although South Africa’s achievements may have seemed modest in contrast to those of other nations, the central bank had experienced significant progress as a result.

Kganyago claims that the Reserve Bank involved all of the banks in South Africa, which account for 90 per cent of all settlements, through the usage of CBDCs, and completed full settlements in under two hours. About 11 countries have reportedly fully launched a national digital currency with Nigeria being the first in Africa having rolled out the eNaira in 2021 albeit to a less-than-satisfactory effect, while several other African nations are in the exploratory and testing phases.

Globally, 114 countries, representing over 95 per cent of global GDP, are reported to be exploring a CBDC, per Atlantic Council’s CBDC Tracker, and over 20 countries have signalled intentions to take significant steps towards piloting a CBDC in 2023.

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