Regulations governing tokenized deposits and crypto assets will likely take effect on January 1, 2025, according to a senior fintech analyst at the South African Central Bank. However, the analyst said regulators are still trying to understand and learn about the risks associated with the use of distributed ledger technology.
Central Bank Considers Appropriateness of Retail CBDC
Gerhard van Deventer, senior fintech analyst at the Reserve Bank of South Africa (SARB), recently revealed that regulations governing so-called tokenized deposits and crypto assets are expected to take effect on January 1, 2025. While the measure is considered an important milestone, Deventer warns that regulators still need to understand the risks associated with the technology behind digital assets.
To that end, SARB and its partners have conducted experiments aimed at understanding and identifying the risks as well as the benefits of distributed ledger technology (DLT) Project Khokha and Project Khokha 2 are South Africa’s central banks in collaboration with commercial banksone of theexperiments conducted by the Central Bank of South Africa in collaboration with the Bank of Commerce.
In one of the experiments, the SARB is said to have considered a generic retail central bank digital currency (CBDC). The South African Central Bank has similarly considered wholesale and multi-CBDC, and according to Deventer, the bank is now interested in finding a way forward.
“SARB recently completed a project to investigate the feasibility, desirability, and appropriateness of a retail CBDC in South Africa. We are currently working on an internal project to determine how to proceed,” said the fintech analyst.
However, according to areportpublished in Creamer Media’s Engineering News, South Africa’s regulators, the SARB and the Financial Sector Conduct Authority (FSCA), as well as the financial industry,
have not yet done much work on the sound handling of crypto assets still need to do a lot of work on the sound handling of crypto assets, according to the report.
Benefits of Central Bank Digital Currencies
” On the other hand, the report also quotes Sim Tshabalala, Chief Executive Officer (CE) of Standard Bank, on the benefits of using CBDCs to facilitate secure interbank payments, as he recently said: according to Tshabalala, CBDCs, especially retail CBDCs, are a good way to increase formal potentially increase participation in the financial system. They can also reduce opportunities for tax evasion and other financial crimes.
However, Tshabalala noted that there are still questions about the role of central banks if CBDCs become widely used. He said:
{But it is not clear at this stage how the balance of retail CBDC held at commercial banks will differ from other deposits, or how the balance of CBDC held by individuals or firms directly at the central bank will differ from the centra.
