South Africa CBDC Tracker

South Africa is in the pilot phase. The South African Reserve Bank has been working on a CBDC since 2018. It was a key participant in the development of two CBDC prototypes led by the Bank for International Settlements and even developed a proof-of-concept on its own.

Note: South Africa, Namibia, Lesotho, and Swaziland are part of the Common Monetary Area. Unlike the Eurozone where all members use a single currency, each member of the Common Monetary Area issues their own currency. However, each currency is pegged to the South African rand.

CBDC History and Development

In 2018, the South African Reserve Bank started a “proof of concept designed to simulate a ‘real-world’ trial of a distributed ledger technology (DLT)-based wholesale payment system.” In other words, the central bank began to build a wholesale CBDC. This effort was labeled “Project Khokha.” The project was built on “Quorum, using Istanbul Byzantine Fault Tolerance (IBFT), Pedersen commitments, and range proofs.”

The South African Reserve Bank mentioned CBDCs in its 2019/2020 Annual Report. The report explained that the central bank would research CBDCs as one of its five strategic focus areas. Specifically, the report said, “[We are] also exploring the desirability and appropriateness of an official CBDC, backed by the rand and usable as legal tender. [We] will engage with other policymakers to deliberate on policy positions and debate whether a CBDC has merit for the South African market.”

In February 2021, the South African Reserve Bank brought back an old project under the name Project Khokha 2. Building on the first iteration of Project Khokha, the goal of Project Khokha 2 was to use a wholesale CBDC to settle securities or loans.

The South African Reserve Bank also initiated a study on the feasibility of issuing a CBDC in 2021. The study was meant to find whether a retail CBDC would help the central bank achieve its goals. The results of the study were never released. Speaking about the feasibility project, South African Reserve Bank governor E L Kganyago said, “The aim of the study is to understand which elements of a CBDC would be most beneficial for South Africa, explore various design considerations, understand policy impacts as well as intended and unintended consequences of using CBDC, and explore appropriate legal and regulatory regimes.”

Alongside the Reserve Bank of Australia, the Central Bank of Malaysia, and the Monetary Authority of Singapore, the South African Reserve Bank worked with the Bank for International Settlements on a wholesale CBDC pilot (referred to as Project Dunbar). Beginning in September 2021, the pilot involved developing two prototypes for international settlements in an effort to improve cross-border transactions between financial institutions. Early challenges identified related to questions of governance (e.g., getting all banks on a common platform), access, and regulatory boundaries.

Later in October 2021, the central bank published a “Frequently Asked Questions” page devoted to CBDCs. Most notably, the page said that the central bank was investigating CBDCs, but it had not yet decided to launch one. The central bank also published a research agenda for 2021 to 2023 that mentioned CBDCs. The agenda noted that the central bank would investigate how a CBDC might be used to “enhance financial inclusion in South Africa.”

According to the South African Reserve Bank’s 2021/2022 Annual Report, the central bank was asked about the timeline for the feasibility study. The central bank “explained that the CBDC feasibility study was underway, and once it had been completed it would be released for public comment.”

Project Dunbar came to a close on March 22, 2022. Similar to Project mBridge, Project Dunbar investigated how a single platform could be used by multiple CBDCs. The project developed “two prototypes for a shared platform that could enable international settlements using digital currencies issued by multiple central banks.”

In April 2022, the South African Reserve Bank published its findings from Project Khokha 2. This second phase of Project Khokha “explored the impact of [distributed ledger technology] on trading, clearing and settlement in a limited proof-of-concept (PoC) environment.” Reflecting on the project, South African Reserve Bank governor Lesetja Kganyago said, “I think it is unlikely that decentralised markets will be suitable in all instances or that decentralisation will guarantee the achievement of public policy objectives such as consumer protection, financial stability as well as safety and soundness, which fall within the mandates of central banks and regulators.”

During an event hosted by the Bank of Namibia in September 2022, South Africa Reserve Bank official Lyle Horsley shared that the central bank was researching retail and wholesale CBDCs. Horsley said no decision had been made on whether to issue a CBDC, but that an internal feasibility study was being conducted to better understand the decision.

The South African Reserve Bank announced in its 2022/2023 Annual Report that the CBDC feasibility study was completed and the findings were under review. However, the central bank reiterated that it had not made a decision on whether to proceed.

The South African Reserve Bank highlighted Project Khokha 2 in its 2023/2024 Annual Report. Specifically, the central bank mentioned that “the participants were able to build their own applications on the PK2 infrastructure through four technical proofs of concept (PoCs). The PoCs explored a cross-border stablecoin, a domestic banking industry stablecoin, a trade finance platform and an asset tokenisation platform.”

In April 2024, the South African Reserve Bank officially published a “Digital Payments Roadmap Report” to outline its future plans. Of the 17 action items listed, number 16 recommended that the central bank “further explore the feasibility of digitalizing money/cash through the issuance of retail CBDCs and use cases for a wholesale CBDC.” It was also recommended that this exploration take place over a two-year period.

Human Rights and Civil Liberties Concerns

South Africa earned a 79 out of 100 in Freedom House’s 2023 Freedom in the World report. Although the country is generally rated favorably, corruption is very much an issue.

Freedom House has reported that “Comprehensive anticorruption laws and several agencies tasked with combating corruption exist, but enforcement has historically been inadequate.” Unfortunately, this has resulted in several officials accused of corruption going without prosecution, long-standing accountability failures, and even the possible murder of a whistleblower. The existence of pervasive corruption is a major concern with CBDCs because it calls into question any promises that might be made by the government to limit surveillance, control, or other risks of CBDCs. Furthermore, the existence of corruption calls into question whether CBDC policies might be designed to exert political favoritism through subsidies, price controls, or other targeted restrictions.

For additional information on concerns regarding violations of human rights and civil liberties, see the following reports by Amnesty International, Financial Tyranny Index, Freedom House, Human Rights Watch, Privacy International, and the U.S. Department of State. For additional information on concerns regarding the risks of CBDCs, see the following webpage and report by the Cato Institute: The Risks of CBDCs and Central Bank Digital Currency: Assessing the Risks and Dispelling the Myths.

For additional information regarding metrics, the methodology page explains each of the data points and provides their respective sources.