Pretoria: The South African Reserve Bank's (SARB) position paper on a retail central bank digital currency (CBDC) in South Africa has concluded that there is no compelling immediate need for its implementation. A retail CBDC is defined as a purely digital banknote, denominated in the national unit of account, which could be used by individuals to pay businesses, shops, or each other, or between financial institutions to settle trades in financial markets.
According to South African Government News Agency, the SARB's research and experimentation found that a retail CBDC is technically feasible and could be implemented in a way that aligns with regulatory and policy objectives. However, the analysis does not reveal a strong immediate need for such an instrument. Instead, the SARB concluded that ongoing initiatives such as the Payment Ecosystem Modernisation Programme and expanding non-bank participation in the national payment system should remain the priority in the short-to-medium-term.
The SARB position paper on the necessity of a retail CBDC in South Africa and background note was published on the bank's website. The study focused on the potential role of a retail CBDC as a digital complement to cash, particularly in the context of South Africa's evolving payment landscape and persistent financial inclusion challenge.
The SARB noted that in the longer term, there may be a need for a retail CBDC to safeguard public access to central bank money-a public good that remains essential in a digital economy-and unlock opportunities to complement and enhance the existing payments landscape while supporting broader financial innovation in South Africa. While the SARB does not currently advocate for the implementation of a retail CBDC, it will continue to monitor developments and will remain prepared to act should the need arise.
As the SARB continues its CBDC journey, the next phase will pivot toward further exploration of wholesale CBDC. This strategic shift reflects the growing global momentum around wholesale applications and their potential to enhance financial market innovation, cross-border payment efficiency, and systemic resilience. The SARB will outline its plans for this next phase in due course.
The study also highlighted significant growth in the adoption and use of digital payments in South Africa, driven by innovative solutions introduced by commercial banks, fintechs, and the efforts of the SARB and other public sector agencies and partners. These are anticipated to continue having a positive impact on financial inclusion, with a growing number of South Africans expected to adopt and use digital payments regularly.
Notwithstanding the progress made, evidence also shows that physical cash continues to play a significant role in South Africa, particularly for certain segments of the population. This prevailing cash reliance is due to barriers such as infrastructure availability, costs of digital payments, and network and power issues.
The SARB emphasized the importance of balancing access to both central bank and commercial bank money to maximize trade efficiency. The continued ability to redeem private money into safe and liquid public money provides a safety net in times of economic stress and maintains confidence in the financial system.
In SARB's view, continued commitment and resources should be dedicated to realizing the opportunities of existing payment modernization initiatives, such as expanding the PayShap value proposition, enabling interoperability of different stores of value, allowing non-banks to issue electronic money, participating directly in the national payment system, QR code standardization, and introducing an open banking/open finance framework, among others.
SARB stressed that the conclusion of the study should not be interpreted as a view that South Africa should not implement a retail CBDC in the future. The study can be accessed on [SARB's website](https://www.resbank.co.za/en/home/publications/publication-detail-pages/Fintech/sarb-position-paper-on-the-necessity-of-a-retail-cbdc-in-south-africa).