Lesetja Kganyago, the present governor of the South African Reserve Bank (SARB), has insisted on the consistent belief of the central bank that cryptocurrencies like bitcoin and others are not currencies. Kganyago has maintained that crypto-assets, as he prefers to call them, are not to be regarded as currencies because they do not meet the standard of a typical currency.
Crypto and the Currency Experiment
Referencing recent remarks of Mills Soko, a South African university professor, Kganyago reiterated that cryptocurrencies like bitcoin only partially meet one out of the three key characteristics of a typical currency. Explaining the reasons behind his assertion, Kganyago said:
Firstly, a currency must be a generally accepted medium of exchange. Secondly, it must be accepted as a store of value. And thirdly, it must be a unit of account. A cryptocurrency definitely has storage value. It is also a medium of exchange but is not generally accepted. It’s only accepted by those who are in one way or the other involved in the business.
Despite the stance of the SARB governor on this issue of cryptocurrencies, he is of the opinion that the central bank must still regulate these assets because when people go and invest in cryptos and eventually lose money, they blame the government or ask what the government has done about it.
Blockchain Technology Useful
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As expected, Kganyago, just like many of his peers, heaped praises on blockchain technology saying it “can be useful in many other respects.” The governor also reiterates that SARB, just like central banks around the world, is still in the stage of experimenting with blockchain technology.
When asked if the SARB has plans to regulate fintech firms the exact same way banks are being regulated, Kganyago argued that when the activities of such fintech companies begin to resemble those of regulated entities, then the central bank will be left with no option than to regulate.
He explained that a fintech firm that takes deposits will be regulated like a deposit taker. In the same vein, a fintech firm that does money transmission will be regulated like a payments provider. And a fintech firm that sells insurance policies will be regulated like an insurer.