Legal considerations for adopting central bank digital currencies for cross-border payments in the Southern African development community region

Abstract

This study examines the legal and institutional foundations required for the implementation of a cross-border central bank digital currency (CBDC) project for the Southern African Development Community (SADC) region. It addresses three central lines of inquiry. The first concerns the necessity of introducing a cross-border CBDC in the region, especially given that SADC already operates the SADC Real Time Gross Settlement (SADC-RTGS) system and the Transactions Cleared on an Immediate Basis (TCIB) payment scheme, which respectively support high-value interbank and low-value retail cross-border payment transactions. The thesis demonstrates that although these systems have improved cross-border payment transactions, they continue to face limitations, including in relation to access, currency reliance, regulatory inconsistency and uneven technical readiness. These shortcomings indicate that a cross-border CBDC could provide targeted benefits, including for wider participation, faster settlement, enhanced transparency and more consistent treatment across jurisdictions. The analysis, however, stresses that CBDCs should not be viewed as replacements for existing systems. Their role is better understood as a future extension of regional payment infrastructure that builds on ongoing modernisation efforts. The second line of inquiry evaluates possible implementation models. The study distinguishes between direct models and interoperability models. It finds that interoperability offers the strongest alignment with SADC’s cooperative frameworks and integration objectives. Within this, the compatibility variant provides a practical starting point, with more integrated models becoming feasible as legal and technical harmonisation deepens across the region. The third line of inquiry assesses the legal and institutional readiness of the SADC to support a cross-border CBDC initiative in a coherent and sustainable manner. It shows that SADC has established institutional structures capable of coordinating regional payment work, including the Committee of Central Bank Governors, the Payment System Oversight Committee, and the SADC Fintech Working Group. However, existing legal instruments and model laws of the regional bloc do not specifically address CBDC-related issues. The study identifies gaps in the Protocol on Finance and Investment, Annex 6 and the regional model laws and proposes targeted reforms. The study concludes that a cross-border CBDC is feasible for SADC only through gradual, coordinated and legally grounded progress. On the whole, the thesis provides a conceptually grounded framework for assessing legal and institutional readiness for a regional CBDC project. It offers guidance for future policy, legal and institutional reforms for the SADC as it navigates the evolution of regional payment systems and considers the conditions under which a cross-border CBDC project may become viable.