The South African Reserve Bank (SARB) has described the development of national cryptocurrencies as ”too risky” for the central bank to consider. The statement has been made during a period of increasing development of national cryptocurrencies on the part of authoritarian governments.
“For the Central Bank to Issue Virtual Currencies or Crypto-Currencies in an Open System Will Be Too Risky” – Francois Grope, Deputy Governor of the South African Reserve Bank
During a recent keynote address at the 2017 Strate GIBS Fintech Innovation Conference, Deputy governor of the South African Reserve Bank, Francois Grope, has described the possibility of developing a national cryptocurrency as “too risky”.
During his address, Grope acknowledged the immense disruptive potential of bitcoin and cryptocurrency, and the transformations that contemporary fintech technologies are driving upon traditional banking processes. “We are witnessing the disruption of financial services”, Grope stated. “Over the past decade or so, fintech’s attention and publicity has continued to intensify and increase. It is continuing to usher in completely new ways of banking. Developments in the fintech space are part of an evolutionary process driven by innovations… Virtual currencies have the potential of becoming widely adopted. However, for the central bank to issue virtual currencies or crypto-currencies in an open system will be too risky for us. This is something that we really need to think about.”
The statements come at a time of increasing development of national cryptocurrencies and blockchains, particularly on the part of authoritarian governments. In recent months, Belarus, Singapore, Russia, and China have taken significant steps toward the development and issuance of state directed virtual currencies.
Last month, the central bank of Belarus announced the implementation of blockchain technology into its banking sector, and unveiled plans for future applications for blockchain in the nation’s financial system. Belarus’s central bank revealed that blockchain technology will initially be used as the basis of transnational information transfers. “The new mechanism of maintenance of the register of bank guarantees will ensure the mutual access of the economic entities of the states being members of the Eurasian Economic Union [Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia] to the procedures of the government procurements of goods (works, services).” From there, Belarus intends to utilize blockchain technology as the basis for the issuance of securities and the development of the centrally administered national smart contract network. Belarus’s central bank has explicitly stated that it does not intend to utilize the national blockchain for virtual currency transfers.
National Cryptocurrencies Are Increasingly Being Developed by Authoritarian Regimes
Russia’s deputy Prime Minister has recently stated his support for developing a tightly controlled national cryptocurrency – sentiment that has been echoed by Bank of Russia representatives. Russia is also exploring the development of centrally administered smart contracts, with government officials meeting directly with co-founder of Ethereum, Vitalik Buterin, earlier this year. China is similarly exploring an array of applications for state administered distributed ledger technology, and has previously partnered with Factom on a project designed to enhance the efficiency of prospective Chinese smart-city projects. Singapore also successfully completed a trial project in partnership with Deloitte that saw the issuance of Singaporean dollars via distributed ledger technology earlier this year.
The current international climate suggests that distributed ledger technology is highly appealing to authoritarian governments, indicating that we will likely continue to see illiberal regimes continue to develop state administered versions of blockchain technology. This trend is also evidenced by the increasing popularity of cryptocurrency technology among self-proclaimed autonomous entities, with Transnistria, Donetsk, and Orania all seeking to adopt virtual currency technology as a quick fix to underdeveloped and failing economic and governance structures.
Some liberal states are defying this trend and also moving towards developing centrally administered blockchains, with Estonia recently announcing plans to launch the world’s first government-backed ICO. The majority of liberal nations, however, appear to be taking a cautious approach to cryptocurrency technology, and despite recognition of the potential efficiency savings offered by centrally administered distributed ledger technology, have thus far sought to monitor and regulate private ventures seeking to develop blockchain technology.
Do you think that national cryptocurrencies will become means for governments to garner the efficiency savings of crypto whilst repressing its disruptive potential? Share your thoughts in the comments section below!
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