South African Reserve Bank (SARB) governor Lesetja Kganyago has reiterated the central bank’s longstanding belief that cryptocurrencies like Bitcoin are not currencies. According to Kganyago, crypto assets as he prefers them are not currencies because they do not conform to the standard of any currency.
Crypto and the currency test
In recent remarks to Mills Soko, a professor at a South African university, Kganyago claims that cryptocurrencies like Bitcoin only partially fulfill one of the three key characteristics of a currency. Kganyago stated:
First, it must be a generally accepted medium of exchange. Second, it must be accepted as a store of value. And third, it has to be a unit of account. A cryptocurrency is a store of value. It is a medium of exchange, but it is not widely accepted. It is only accepted by those who participate.
Despite this stance on cryptocurrencies, however, the SARB governor insists that the central bank still needs to regulate these assets because “people invest in crypto and when they lose money they ask what the government has done about it”.
Useful blockchain technology
Predictably, like many of his colleagues, Kganyago praises blockchain technology and says that it “can be useful in many other ways”. The governor also reiterates that SARB, like central banks around the world, is experimenting with blockchain technology.
When asked if the SARB plans to regulate fintech firms in the same way that banks are regulated, Kganyago argued that the central bank will have no choice but to regulate when these firms’ activities are similar to regulated firms . He said:
So if you are a fintech company and take deposits, we will regulate you like a deposit taker. If you’re a fintech company doing money transfers, we’ll regulate you like a payment provider. If you’re a fintech company selling insurance policies, we’ll regulate you like an insurer.
Still, Kganyago claims that the SARB “understands the value fintech firms bring to the financial sector.” For this reason, according to him, the central bank “created an innovation hub at the Reserve Bank”.
Do you agree with what Kganyago said about cryptocurrencies? Let us know what you think in the comments section below.
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