SARB's Cassim on payments, digital assets, CBDC
South African Reserve Bank Deputy Governor Rashad Cassim outlined the SARB's approach to modernizing payment systems, digital assets, and central bank digital currency (CBDC). He emphasized balancing innovation with financial stability and public interest.
The plumbing of finance
Mr. Cassim highlighted financial market infrastructures (FMIs), often called the "plumbing" of the financial system, as systemically important and a hub for innovation.
He explained the foundational distinction between large-value wholesale payments and low-value retail payments.
For central banks, wholesale payments are a core responsibility, with the South African Multiple Option Settlement (SAMOS) system processing an average of R584 billion daily.
Nearly 90% of this value is settled in real time.
South Africa transitioned to a real-time gross settlement (RTGS) system in 1998, a pioneering move that significantly reduced settlement risk by requiring individual, irrevocable settlement for transactions over R5 million, using central bank reserves.
SARB's digital payment journey
While South Africa led in wholesale payments, it lagged in fast retail payments.
In response, the SARB launched PayShap, an initiative with the private sector to improve retail payment speed and cost.
The SARB explored decentralised technologies like distributed ledger technology (DLT) through Project Khokha.
Project Khokha 1 demonstrated DLT's ability to move tokenised central bank money in a controlled environment, revealing trade-offs between privacy and efficiency.
Project Khokha 2 expanded this to include tokenised securities, a wholesale CBDC, and a stablecoin-like token, bringing experiments closer to real-world operations and raising governance and legal questions.
The SARB's retail CBDC exploration concluded there is no compelling need for immediate implementation, prioritizing modernization of the existing payment system instead.
The stablecoin policy test
The SARB's Payments Ecosystem Modernisation (PEM) marks a shift to actively shaping the payment landscape through a hybrid public-private approach.
This strategy aims to support innovation, promote competition, and widen access for non-bank players, while safeguarding financial stability against liquidity, credit, and cyber risks.
Stablecoins present a distinct challenge, as they are privately issued and not yet regulated to the same standard as traditional money.
The SARB remains cautious, assessing whether existing frameworks can extend to stablecoins or if new regulation is needed, particularly if they begin to function as an alternative to publicly issued money.