Digital Rand Trials Reveal Privacy and Speed Tradeoffs
The South African Reserve Bank (SARB) has no compelling need to immediately launch a digital version of its currency, a top official said, citing significant design tradeoffs and a higher priority to upgrade the nation’s underlying payment infrastructure.
While a central bank digital currency (CBDC) is technically viable, the immediate focus must remain on making everyday transactions faster and cheaper for citizens through existing systems, Reserve Bank Deputy Governor Rashad Cassim reportedly said in a recent address to the Gordon Institute of Business Science.
The central bank’s cautious stance comes despite growing pressure from private-sector innovations, such as stablecoins, which some economists warn could threaten South Africa’s monetary sovereignty if left unchecked.
The SARB has spent years researching a digital rand. It launched Project Khokha in 2018 to test distributed ledger technology (DLT)—the decentralized tech underpinning cryptocurrencies—followed by Project Khokha 2 to experiment with wholesale digital currencies and commercial bank tokens.
While the trials proved a digital rand could successfully move and settle money, they also exposed deep operational challenges.
“Keeping transactions private is possible, but it complicates design and slows the system,” Cassim said, noting that protecting user privacy came at the direct expense of clearing efficiency.
Cassim also highlighted legal and technical hurdles, stating that decentralized networks lack automatic legal clarity on when a payment is considered “final,” and they do not naturally sync with traditional financial networks.
“DLT systems do not automatically interoperate with existing payment infrastructure,” Cassim said.
Upgrading the ‘Plumbing’ First
Instead of the CBDC, the central bank is prioritizing the modernization of what Cassim called the “plumbing of the financial system”—the financial market infrastructures that quietly route money behind the scenes.
While South Africa has historically led its peers in large-scale wholesale banking payments, Cassim acknowledged the country has lagged behind in fast, real-time retail payments for regular consumers.
The bank is actively trying to close that gap through Payshap, a real-time digital payment service, and by taking control of clearing house Bankserv Africa to establish a payments utility called Payinc.
“The compelling need is to modernize the payment system to give every South African fast, simple and secure digital payments,” Cassim said.
The decision to pause a digital rand carries risk. As private entities increasingly drive financial innovation and promote decentralized finance, the central bank faces a battle to maintain its grip on the money supply.
Some analysts warn that the government’s slower pace could backfire. Dawie Roodt, chief economist at the Efficient Group, warned that South Africa’s outdated foreign exchange regulations are failing to keep up with financial technology.
Without modern regulations or a digital alternative backed by the state, Roodt warned that citizens may eventually ditch the traditional financial system entirely in favor of private stablecoins.
Such a shift poses a direct threat to the Reserve Bank’s primary mandate: controlling the money supply and protecting the value of the rand. If citizens bypass the national currency, the central bank’s authority is effectively eroded—a reality that has led to persistent calls from some sectors for a digital rand.
For now, the Reserve Bank is betting that fixing its current infrastructure will be enough to keep private alternatives at bay, keeping the digital rand on the shelf until the technological and legal tradeoffs can be justified.
