Reserve Bank talks ‘digital rand’ and crypto in South Africa
Regulators have made positive strides in bringing crypto-assets within the regulatory perimeter, says the South African Reserve Bank (SARB).
This comes as the central bank continues its investigation and stress testing of distributed ledger technology (DLT) in financial markets. DLT is a decentralized system that records transactions, serving as the underlying framework for cryptocurrencies like Bitcoin.
In its latest annual report for 2022/23, the SARB said that following the publication of the Project Khoka 2 report in April last year, it has continued its technical exploration of DLT in regulated markets to “unpack the policy and regulatory implications of potential new forms of money and tokenisation.”
Project Khoka 2 explored tokenized money, blockchains, and digital currency. It resulted in two new forms of money: a tokenized central bank money for interbank transactions and a stablecoin for commercial banks to buy SARB debentures and raise capital.
A tokenised currency used by central banks would take the form of a CBDC (Central Bank Digital Currency).
Regarding a timeline for CBDC’s the bank said there is no exact timeline set at this stage as it is still on a ‘learning journey’.
SARB said that the application of new technologies allows for financial services to be offered in different ways enabling the evolution of the practice of ‘open finance’.
The bank said that this allows customers to consent to share their financial data stored by financial service providers with third parties who can then use that data to develop unique and tailored products and services.
It noted, however, that open finance raises a range of questions around data, privacy, and competition issues. For this reason, the bank’s working group on fintech is continuing to research and analyse such areas to inform the policy and regulatory response to open finance.
Crypto
Through the Intergovernmental Fintech Working Group (IFWG), regulators have made strides in bringing crypto-assets within the regulatory perimeter, said SARB.
Over the course of 2022, the Financial Intelligence Centre and the Financial Sector Conduct Authority took steps to bring greater oversight to crypto assets to address anti-money laundering and counter-terrorist financing risks.
On top of this, the Prudential Authority, which is the primary authority in terms of financial oversight, issued a guidance note to regulate entities clarifying the adequate anti-money laundering and counter-financing controls.
