Most of the world’s central banks, including those in the European Union, the United States, South Africa and China, were considering launching a digital currency - or had already done so, PwC economists revealed in the firm’s latest SA Economic Outlook Report this week.
PwC said in the report that its research had found that more than 80% of central banks were now considering launching a Central Bank Digital Currency (CBDC) or had already done so. CBDCs are a form of digital money, denominated in the national currency of account, and are a direct liability of a country’s central bank.
“Legal digital-tender is currently in use in The Bahamas and Nigeria, with Jamaica and the Eastern Caribbean expected to follow soon. Elsewhere, the People’s Bank of China is conducting large-scale public trials in selected cities and the e-CNY was one of only three payment methods accepted at the venue during the 2022 Winter Olympics,” PwC said.
India’s finance minister pledged in February to have a virtual version of the rupee in circulation later this year, and the Philippines has also announced its own pilot implementation.
“The US has placed 'the highest urgency' on research and development efforts into the potential design and deployment of a US CBDC. In turn, the European Commission plans to propose a bill for a digital euro in early 2023,” the report said.
PwC’s Global CBDC Index and Stablecoin Overview 2022 evaluated South Africa’s progress with its CBDC launch, ranking the country 6th out of 25 countries on its wholesale index.
“Wholesale CBDCs are for use by regulated financial institutions for the settlement of interbank transfers and related wholesale transactions. Saudi Arabia ranked 11th in 2021, and Switzerland, which was 12th in 2021, entered the wholesale top 10 in our 2022 publication,” PwC said.
The UK exited the top 10 after the Bank of England said in November last year that there was no need for a wholesale CBDC in the UK given the presence of the territory’s Real-Time Gross Settlement (RTGS) system.
“Over the years, South Africa has undertaken domestic research and exploration projects on CBDCs. Project Khokha Phase 1 commenced in 2017 with a team consisting of seven banking industry participants with the support of ConsenSys (a technical service provider) and PwC. The project delivered a realistic test of a Distributed Ledger Technology (DLT)-based wholesale payments system. The results showed that the typical daily volume of the South African payments system could be processed in less than two hours, with full confidentiality of transactions and settlement finality,” PwC said.
In 2021, the Intergovernmental Fintech Working Group launched Project Khokha Phase 2 to explore the impact of DLT on trading, clearing and settlement in a limited proof-of-concept environment. The SARB released a report on the results during early-April 2021and announced its participation in Project Dunbar, developing prototypes for shared platforms enabling international settlements with digital currencies issued by multiple central banks.
“During the project, the SARB collaborated with the Reserve Bank of Australia, Central Bank of Malaysia, and the Bank of International Settlements (BIS) Innovation Hub to design and develop a platform facilitating settlements of multiple CBDCs. The project developed prototypes demonstrating how commercial banks can transact directly with each other, using wholesale CBDCs of their respective countries and eliminating the need for intermediaries and reducing the time and cost of cross-border transactions,” PwC added.
