The future of payments, digital assets and stablecoins
South African Reserve Bank Deputy Governor Rashad Cassim outlined the central bank's strategy for modernizing payment systems and navigating the future of digital finance. Speaking at the Gordon Institute of Business Science, Cassim detailed SARB's cautious approach to digital assets and stablecoins while stressing the need for innovation.
The plumbing of finance in motion
Deputy Governor Cassim highlighted the foundational role of financial market infrastructures, particularly payment systems, in economic growth.
He detailed the South African Reserve Bank's (SARB) long-standing responsibility for wholesale payments, underpinned by the SAMOS real-time gross settlement (RTGS) system, which processes approximately R584 billion daily.
While South Africa pioneered wholesale payments, Cassim acknowledged a lag in fast retail payments, leading to the development of PayShap.
The SARB also extensively experimented with distributed ledger technology (DLT) through Project Khokha 1 and 2, which demonstrated the feasibility of tokenized central bank money and securities in controlled environments.
These projects, however, also surfaced trade-offs between privacy and efficiency, and raised important governance and legal questions regarding DLT-enabled tokenisation and settlement.
This exploratory work informs SARB's broader efforts to understand public digital money.
No immediate need for retail CBDC
The SARB's exploratory work on retail central bank digital currency (CBDC) is part of a broader effort to understand how public digital money might function in a modernised economy.
While a retail CBDC is technically feasible and could support innovation, Cassim stated there is no compelling need for its immediate implementation.
Instead, the focus is on modernizing the existing payment system to provide fast, simple, and secure digital payments for all South Africans.
The SARB prefers a hybrid system for retail payments, combining its regulatory role with private sector innovation.
This approach aims to coordinate and support wider technology adoption, promote a level playing field, and reduce regulatory barriers for new entrants, particularly non-bank players, while safeguarding financial stability and managing associated risks.
Cautious embrace of digital future
The SARB's measured approach to digital assets, particularly stablecoins, reflects a pragmatic balancing act.
While recognizing their potential, the central bank rightly prioritizes financial stability and regulatory oversight, questioning whether stablecoin growth stems from innovation or regulatory arbitrage.
This strategy ensures that South Africa's financial system evolves responsibly, focusing on foundational payment modernization before embracing more volatile digital instruments.