- The SA Reserve Bank confirmed on Tuesday that its research into launching a "digital rand" should be completed next year.
- Last month, China launched its own digital currency, while the US is also probing the possibility.
- Digital currencies are backed by the central bank, and can be used to pay for goods and services directly - bypassing retail banks.
The South African Reserve Bank (SARB) on Tuesday confirmed that its research into launching its own digital currency as electronic legal tender should be concluded by next year.
Many other countries – including the US and the UK - are looking into the possibilities of issuing their own digital currencies, with China launching its "cyber yuan" last month. The US Fed said in recent days that is research into an American digital currency will be published in coming weeks.
If launched, the digital rand will be backed by the central bank and it is expected that one digital rand will be equal to one real-life rand. But unlike the physical currency, the digital currency won’t be issued as notes or coins. It will only exist in its digital form.
The digital rand is expected to be "complementary to cash", according to the Reserve Bank statement on Tuesday.
Consumers will be able to use the central-bank-backed digital currencies to pay for goods and services, without having a bank account. They will be able to hold the digital currency in an e-wallet.
Because the central bank will keep track of the movement of the digital currency via a secure digital ledger (using so-called blockchain technology), it will reduce fraud and make it difficult to hide any transactions from the authorities.
Users of these digital currency will be able to settle payments instantly - much faster than via the banks – and it will also much cheaper to transact, since banks are bypassed.
But the South African Reserve Bank says it has not yet made a decision to issue a retail digital currency.
The bank is still investigating the "feasibility, desirability and appropriateness" of such a currency. If launched, it will be be for "general-purpose retail use", complementary to cash, it added.
It also noted that the digital currency feasibility study is different from Project Khokha, which focuses on the settlement of high-value transactions between commercial banks and other companies at the wholesale level. "[But] it is expected that the two studies will result in better policy alignment and coordination."