SA in race to roll out Africa’s 2nd central bank digital currency


SOUTH African Central Bank has given local lenders the green light to begin processing cryptocurrency transactions, a fresh indication that the country may be pushing to deliver the continent’s second digital e-money.

In new guidelines published on August 15th, 2022, by the South African Reserve Bank, lenders “may act as a conduit for funds” tied to crypto asset service providers and “may play a role in customers wishing to purchase crypto assets” or “receive pay-outs in fiat currency in their bank accounts”.

They are also required to monitor these transactions and any suspicious activities as part of a risk assessment to counter incidences of money laundering and those that could threaten financial integrity.

“Banks must ensure that they maintain adequate records in respect of all customer transactions… for a minimum period of five years or five years from the date of submission of a suspicious or unusual transaction report,” said South African Reserve Bank Chief Executive Officer, Fundi Tshazibana.

By June, South Africa and Ghana were the only African countries piloting regulated digital currencies.

South Africa has undertaken two pilots. One focuses on the use of an e-currency by financial institutions for interbank transfers under the country’s Project Khokha, and the other focuses on cross-border payments between the South African Reserve Bank and the central banks of Australia, Malaysia, and Singapore.

With the new guidelines, South Africa has moved further ahead of the West African country.

Ghana is still piloting its eCedi through a contactless smart card for purchasing groceries in Sefwi Asafo, a small, remote town.

As the process to deliver Africa’s second CBDC continues, Nigeria, which launched its eNaira last year, has embarked on an aggressive campaign to market the digital currency in a push to drive up adoption numbers.

This month, the country’s central bank launched the project’s second phase, with a series of events, new products, and features geared toward increasing usage numbers and transaction values.

Through an eNaira hackathon dubbed “eNaira – Africa’s Gateway to a Digital Economy”, Nigeria’s bank’s regulator announced the start of its drive to increase user numbers.

“The second phase of the eNaira project has begun and is intended to drive financial inclusion by onboarding unbanked and underserved users leveraging offline channels,” said Central Bank of Nigeria Governor Godwin Emefiele.

According to the central bank, the eNaira wallet has seen 840,000 downloads, with about 270,000
active wallets. The majority (over 252,000) are consumer wallets while some 17,000 are merchant wallets.

So far, more than 200,000 transactions have been recorded on the platform, with a value of N 4.4 billion
(US$ 10.4 million) which the bank termed “remarkable”.

A USSD channel (which provides for a real-time session on a mobile handset) has also been activated to bolster onboarding efforts and deepen financial inclusion for those who may not have bank accounts but do have at least a feature phone. The app is currently marketed as a tool for financial interventions and welfare disbursements.

The eNaira is expected to support poverty reduction, enable direct welfare disbursement, support a resilient payments ecosystem, improve availability and usability of money, facilitate diaspora remittances, reduce the cost of processing cash and improve the efficiency of cross-border payment

The Nigeria Inter-Bank Settlement System (NIBSS) – an Instant Payment solution – has also been activated, to allow eNaira users to seamlessly transact between the eNaira and any bank of their choice.

To promote the adoption of eNaira by businesses, the CBN has also begun sealing strategic partnerships with trade bodies like the Abuja Chamber of Commerce and Industry, has introduced merchant reward schemes and has dangled a 50 percent subsidy on merchant service charges as a carrot.

At least 15 African countries (including South Africa and Ghana) have either announced plans to launch regulated virtual money or are in the research, development, or pilot stage.

According to the Central Bank Digital Currency (CBDC) tracker, four countries – Rwanda, Zambia, Sudan, and Uganda have announced their intention to adopt digital currencies in 2022.

Worldwide, a total of 10 countries across the world have fully launched a digital currency, with the number expected to expand as 50 countries enter the advanced phase of exploration – development, pilot, or launch – according to the Atlantic Council, an American think-tank.

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