South Africa Reserve Bank Commences Retail CBDC Feasibility Study

The South African Reserve Bank (SARB) says it has commenced a feasibility study for a general-purpose retail central bank digital currency (CBDC). The study, which the SARB expects to conclude in 2022, will focus on the issuance of a domestic CBDC that can be used by consumers in South Africa for general retail purposes.

Study to Focus on Retail CBDC

In a statement released on May 25, 2021, the central bank says the feasibility study will include practical experimentation across different emerging technology platforms. The study will take into account a variety of factors, including policy, regulatory, security, and risk management implications.

Still, the statement clarifies that this latest study will be distinct from the previous one. The statement explains:

It should be noted that while the CBDC feasibility study is different from Project Khokha, which focuses on the settlement of high-value transactions between commercial banks and other stakeholders at the wholesale level, it is expected that the two studies will result in better policy alignment and coordination.

However, the SARB has downplayed the possibility of it launching digital currency in the near future. It said it has “made no decision to issue a retail CBDC.”

CBDCs and the SARB’s Mandate

In 2017, the SARB created a simulation (Project Khokha) to assess if the performance, scale, and confidentiality of payments were possible utilizing the Ethereum blockchain technology. This simulation reportedly “exceeded the transaction performance target at 70,000 transactions in less than two hours.”

Additionally, the simulation achieved a “95% block propagation time in less than 1 second and 99% propagation in less than 2 seconds.” The results demonstrated that “acceptable performance is achievable, despite the geographical distribution of the banks’ hardware.” Concerning its latest feasibility study, SARB says this will also consider how the issuance of a general-purpose CBDC will feed into the central bank’s policy position and mandate.