Governments generally approach new trends very slowly. South Africa, famously, can’t even manage its television signal switchover. That operation is about a decade late, so far. So it’s a little surprising to learn that the South African Reserve Bank (SARB) is working on a digital Rand. More or less.
It’s not something that’ll come to everyday South Africans in a big hurry, however. It’s part of a joint project between the reserve banks of several countries, as well as the Bank for International Settlements. The other countries involved are Australia, Malaysia, and Singapore.
The value of a digital Rand
The point of the project, which is code-named ‘Project Dunbar’, is to create a shared digital currency between the entities involved. It’s not just a digital Rand, then. It’s also a digital dollar (Singaporean and Australian), as well as a digital ringgit — which is what Malaysia’s currency is called. Collectively, these are multiple central bank digital currencies (mCBDCs).
And they’re supposed to make life easier between countries. They do this by allowing “…direct cross-border transactions between financial institutions in different currencies, with the potential to cut costs and increase speed.”
The project has so far developed two prototypes, but mostly it has identified challenges to implementing digital currencies. These were published in a report which is a little… heavy for a Tuesday morning. The gist is that digital currencies, at least on an international level, will work best across similar regions. The development of multiple payment solutions is the most likely outcome.
Banking on the future
Rashad Cassim, deputy governor of the SARB, said, “Even though multi-CBDC exploration is in its infancy, Project Dunbar highlights the possibilities of using multiple CBDCs issued on a shared platform for international settlement. While many unknowns remain, and a number of areas still require further investigation, it is only through our collective understanding and journeying together that we can meaningfully contribute to the G20 roadmap for enhancing cross-border payments.”
Project Dunbar is ongoing, and still experimental. Whether South Africans end up with a stablecoin in the form of a digital Rand is still uncertain. It’ll probably turn up first in international commerce before landing in the hands of everyday people. Because the banks will want to be sure how it works (and how best to exploit it) before turning it out on the common folk. Naturally.