The expression of interest (EOI) issued on April 29, 2019, by the South African Reserve Bank (SARB) says that it is looking for solution providers to offer technological infrastructure and skills to the project. The SARB now seems ready to conduct a central bank digital currency (CBDC) feasibility study to aid this. The CBDC Feasibility Project Charter aim was developed in May 2018 by SARB “to investigate the feasibility and desirability of central bank issued digital currency to be used as electronic legal tender, complimentary to cash.”
In addition to that, another purpose of the feasibility project will be to discover how issuing a CBDC can support SARB’s vision of leading “in serving the economic well-being of South Africans through price and financial stability.” A mandate from the Currency Management Department of the SARB was given in 2016 hence the establishment of this project. According to the order, a selected team was required to investigate the case of a CBDC issued and backed by SARB.
The EOI clearly revealed that the SARB does not have a preference of basing the project on a blockchain or distributed ledger technology platform, or existing traditional technology. “It is envisaged that a solution could be based on any one or a combination of technologies,” SARB stated.
The CBDC feasibility project will be carried out in a contained innovation lab environment based on the directive and this innovation lab will comprise of software, technical skills, infrastructure, and business skills. SARB made it clear, however, that the CBDC feasibility project is exploratory in nature and does not constitute any long-term plan or commitment to issue a government-backed digital currency. The focus of the study would be to issue the CBDC as an electronic version of cash as opposed to a universally accessible form of central bank reserve money or a central bank issued version of commercial bank account money.
The CBDC project is divided into two stages in the innovation lab: first, will be internally conducted testing principles, validating the feasibility of recommended technical solutions, and increasing the body of knowledge. Secondly, there will be an extension of participation to external banks and mobile network operators and potentially to payment service and niche technology providers. A supplementary clause is that to establish the possibility of the solution to satisfy SARB’s objectives the set of use cases will be increased to incorporate the full value chain.
There are already, CBDC Policies put in place for guidance. Some include: CBDC transactions must be free or low-cost to consumers, CBDC must not be easily counterfeited, Only SARB must issue the CBDC as legal tender, Commercial banks must issue the CBDC under SARB’s regulatory oversight, CBDC must be scalable, amongst other policies. It is expected that applications of the EOI will close on June 6, 2019, at 11:30 am.
Credits- Angeline Mbogo
JOIN OUR COMMUNITY