While blockchain enthusiasts were excitedly observing the cryptoasset marketplace this week, and the rest of Southern Africa were poring through South Africa’s national election results, the South African Reserve Bank quietly held a momentously significant meeting.
On Friday 26 April 2019, located in the far corners of the SA Reserve Bank’s website, a tender notification appeared. One that could be the beginning of something quite remarkable for the future of South Africa’s economy: Its very own cryptocurrency.
The tender notification simply read:
“Request for expression of interest from prospective solution providers in anticipation of a feasibility project for the issuance of electronic legal tender – a central bank digital currency issued and backed by the South African Reserve Bank.”
The South African Reserve Bank wants to explore the possibility of a ZAR-backed digital currency.
SA Crypto was informed of the tender notification through a software developer looking to engage with the SARB on this project, a developer who wished to remain anonymous.
The first step was a meeting held at the SARB offices on Tuesday afternoon, 14 May 2019. According to our source, there were a handful of people in attendance, mostly made up of software developers, with one cryptocurrency exchange represented.
The meeting was a brief session, with a recap now available on the SARB website. At the meeting, the SA Reserve Bank admitted to realising that digital cash is the future of commerce, citing the expense of managing physical cash and the safety of the consumer among other things.
But before moving ahead, there are a number of challenges the Reserve Bank must overcome. Namely the biggest risk of all: The stability of commercial banks. The shift of reliance from physical cash to a “CBDC” (central bank digital currency) would see an eventual obsolescence of commercial banks entirely, as their primary role is to manage public cash (and its digital representation on their own centralized ledgers). At Tuesday’s briefing, the SARB emphasised their desire to implement such a digital currency without destabilising these commercial banks. A conundrum a number of Fintech and economic stakeholders will need to debate before the SARB moves forward with the project.
Other conundrums include the actual supply of money. How does the SARB distribute this digital currency in relation to the current supply of the South African Rand?
Additionally, SARB also highlighted the importance of “financial inclusion”, citing the fact that a digital currency could actually have a positive effect on South Africa’s poor – “banking the unbanked”, while not specifically mentioned, is a phrase that comes to mind.
The session was just over an hour, and concluded with an additional call for registered South African companies to put forward official proposals to be involved in the process, which the SARB said was still in “feasibility exploration” phase. Interested parties such as Fintech software engineering firms can read the tender page and requirements on the SARB page here.
Based on the post-session presentation coming out of the meeting, it is clear that the SARB are very serious about this project. They have obviously recognised the opportunities that blockchain-empowered digital currencies present, and how they can change the way we do commerce. Whether they have watched the likes of Singapore & Canada run cross-border blockchain settlements, or JP Morgan create its own digital currency, we can’t tell for sure. What we do know is that the South African Reserve Bank are taking this technology a lot more seriously than many blockchain enthusiasts tend to give them credit for.
How this interacts with many blockchain enthusiast’s ideals is another question altogether. Satoshi Nakamoto invented Bitcoin as a way to circumvent central banking institutions, but maybe there is a future whereby both can co-exist peacefully?
Although the responsibility of just how peaceful that existence is would surely rest on the shoulders of the centralised institutions. Time will tell.
In the meantime, this industry just had another very exciting page written in its history.
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