Recent reports have stated that the South African Reserve Bank (SARB) is contemplating the introduction of a national digital currency based on blockchain technology.
A blockchain is a digital public ledger that records all Bitcoin transactions on the network in chronological order. Completed blocks are linked like a chain and go into the blockchain permanent database, after which a new block is generated.
Speaking to Moneyweb, Tim Masela, Head of the National Payments Systems at SARB, said that it would make sense to look at issuing a digital version of the South African Rand (ZAR) because it is easy to use, is far-reaching, and can guarantee settlements in real-time at reduced cost.
He has, however, voiced concerns over cyber-criminal threats and the unregulated nature of business models: “The proponents of the technology say ‘you don’t need to regulate it; it will self-regulate’. We don’t have an idea of how that will happen, we still need to reflect on this and need a good case to show that it can self-regulate. Otherwise, we believe that if it is not regulated and things go wrong, it could have a spillover effect into the financial systems.”
This will not be SARB’s first time using the distributed ledger system of the blockchain. In 2016 SARB, together with the Payments Association of South Africa, Financial Services Board, Strate and some of the country’s major banks, namely Investec Bank, ABSA, Rand Merchant Bank and Standard Bank, managed to distribute a smart contract via the Ethereum blockchain-based private network.
Africa pioneered digital currency in 2015 when Tunisia became the first nation to put its currency, the Dinar, on the blockchain. At the beginning of this year, Senegal became the second country in the worldto issue a national digital currency using blockchain technology.
South Africa is positioned as one of Africa’s largest economies so if it does forge ahead with its plans to launch a digital currency, it is quite possible that other countries worldwide will follow in the same vein.