South African Firms Launch a Local Currency-Backed Stablecoin

South African firms have launched ZARU, a new stablecoin pegged one-to-one to the South African rand. The stablecoin, known as ZAR Universal, is designed to facilitate faster and lower-cost payments through blockchain technology. It is intended to modernize the financial infrastructure and improve efficiency in cross-border trade.

ZARU is backed by liquid rand-denominated assets such as cash, bank deposits, and South African government bonds. These reserves are managed by Sanlam Specialised Asset Management under an asset-liability management agreement. The backing assets are held by Standard Bank and will be audited monthly by Moore Johannesburg, ensuring transparency and stability.

The stablecoin was launched in collaboration with major South African financial institutions, including Luno, Sanlam, EasyEquities, and Lesaka Technologies. These firms aim to connect traditional financial markets with blockchain infrastructure to enable cheaper and faster transactions.

What Makes ZARU Different?

ZARU is operating on a blockchain, which allows for 24/7 global trade and instant settlement. Unlike traditional banking systems, which are constrained by banking hours and fees, ZARU enables real-time transactions at any time of day. This is a key feature for improving the speed and efficiency of payments, especially in cross-border trade and remittances.

Who Can Use ZARU Now?

Currently, ZARU is available only to qualified institutional investors through the Luno and EasyEquities trading desks. Retail access is expected in a phased rollout, with both platforms planning to extend availability to their broader user bases in the near future. The initial focus on institutional users allows for a controlled launch while ensuring compliance and security.

What Is the Vision for ZARU?

James Lanigan, CEO of Luno, described ZARU as a milestone for South Africa's digital economy. He emphasized that the stablecoin is designed to make payments and money transfers faster and cheaper while being supported by secure reserves. Charles Savage, CEO of EasyEquities, added that ZARU provides a low-cost way for South Africans to participate in the future of finance while keeping the rand central. Ali Mazanderani, executive chair of Lesaka, highlighted ZARU's potential to reduce the cost and increase the speed of rand payments. He noted that the stablecoin is well positioned to benefit consumers, businesses, and society at large. Jacques Le Roux, CEO of Sanlam Financial Markets, stated that the initiative connects traditional financial markets to blockchain to enable faster and cheaper payments.

What Are the Implications for the Financial System?

ZARU operates on a blockchain, which allows for faster and lower-cost transactions. This can improve financial inclusion by making it easier for individuals and businesses to participate in the digital economy. The stablecoin's design also supports the local financial system by keeping the underlying rand assets within South Africa's financial infrastructure.

ZARU's launch is part of a broader trend in South Africa toward adopting cryptocurrencies for cross-border payments and remittances. The stablecoin aims to bridge traditional finance and blockchain-based systems, providing a stable digital currency that is not subject to the volatility of cryptocurrencies like bitcoin.

The introduction of ZARU follows the launch of other rand-backed stablecoins in recent years, such as ZARP and ZAR Supercoin. These stablecoins reflect growing experimentation with digital currencies in South Africa and could lower transaction costs compared to traditional payment methods.

The availability of ZARU is expected to increase global demand for rand-denominated assets by enabling foreign investors and businesses to interact with South African value without holding a local bank account. This can help position the rand in the global digital economy while supporting financial inclusion and efficiency.