The Central Bank of South Africa has begun preliminary research into central bank digital currencies (CBDC). What is CBDC, And How Does It Work? A central bank digital currency, or CBDC, is a type of electronic cash that is one-to-one connected to the sovereign currency, with its value secured by the central bank’s monetary policy and inflation-targeting regime It would allow companies and individuals to make electronic payments that would be directly funded by the federal bank. Objective Of Preliminary Research Into CBDC South Africa is the most recent nation to investigate the prospect of developing its independent digital currency The South African Reserve Bank has started preliminary research on the “desirability and appropriateness” of a retail central bank digital currency, according to a press release released on Tuesday. The SARB described a retail CBDC as a cash-complimentary sovereign digital currency issued by the central bank that is suitable for electronic payments as part of its announcement. “The feasibility study aims to understand how the issuance of a general-purpose CBDC would feed into the SARB’s policy stance and mandate,” said South Africa’s central bank in an announcement. The preliminary report, according to the SARB, would concentrate on issues surrounding a possible CBDC issuance for retail use in South Africa: “The feasibility analysis will involve realistic experimentation across various new technology channels, taking into consideration several factors such as regulation, regulatory, security, and risk management implications.” Central Bank of South Africa Starts Preliminary Research Into CBDC South Africa’s CBDC trial is scheduled to run until 2022, and it could overlap with the current institutional digital payments pilot known as “Project Khokha.” The SARB, like other central banks researching CBDCs, clarified that its latest exploratory experiments were in no way indicative of potential efforts to issue a digital rand. The SARB launched a pilot test for Project Khokha, the country’s tokenized fiat interbank payment scheme, in June 2018. The project will explore digital clearing and transactions for interbank transfers using the Ethereum-based Quorum infrastructure. The global CBDC sector is expanding, with China regarded as the de facto chief — at least among the major economies. In South Korea, the central bank recently announced plans to collaborate with a technology company to develop a sovereign digital currency for testing protocols that will begin in August.
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