A senior fintech analyst at the South African central bank has revealed that regulations governing token deposits and crypto assets could come into effect from January 1, 2025. However, according to the analyst, regulators are still trying to understand or learn about the risks that come with using distributed ledger technology.
Central Bank Considers Suitability of Retail CBDC
Gerhard van Deventer, a senior fintech analyst at the South African Reserve Bank (SARB), recently revealed that regulations governing so-called token deposits and crypto assets are expected to take effect from January 1, 2025. Although this step is being seen to be taken. As an important milestone, Deventer, warned regulators still need to understand the risks that are associated with the technology that underpins digital assets.
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To achieve this, SARB and its partners have conducted experiments that aimed to understand and identify the benefits as well as the risks of distributed ledger technology (DLT). Project Khokha and Project Khokha 2 are among them experiments which were organized by the South African central bank in conjunction with commercial banks.
In one experiment, the SARB is said to have explored a general purpose retail central bank digital currency (CBDC). The South African central bank similarly explored wholesale and multi-CBDCs and according to Deventer, the bank is now interested in moving forward.
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“At SARB, we recently completed a project that explored the feasibility, desirability and suitability of a retail CBDC for South Africa. “We are currently in a process to consider how to move forward,” said the fintech analyst. Making progress with an internal project.”
However, according to a reports Creamer Media’s Engineering News, published in South African Regulators; The SARB and the Financial Sector Conduct Authority (FSCA) as well as the financial industry still need to do more work on prudential treatment of crypto assets.
Benefits of Central Bank Digital Currency
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Meanwhile, the same report also cited Sim Tshabalala, Chief Executive Officer (CE) of Standard Bank, who recently spoke about the benefits of using CBDCs to facilitate secure interbank clearing. According to Tshabala, CBDCs, especially retail ones, could potentially increase participation in the formal financial system. They can also reduce opportunities for tax evasion and other forms of financial crimes.
Tshbala, however, added that questions remain about the role of central banks if CBDCs are to be widely used. They said:
“However, it is not clear at this stage how retail CBDC balances with commercial banks differ from other deposits, or whether CBDC balances held directly by an individual or firm with a central bank are different from the central bank itself with a retail bank.” How does it differ from turning into.
Standard Bank CE said that failing to address this would be tantamount to doing nothing to “mitigate the risks and moral hazards” that arise from direct central bank involvement in the financial system.
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