One more nation, South Africa, is making the first step of migration to a fully digital economy, speaking about offering their own national digital currency based on blockchain technology.
South Africa Looks to Digital Currency
There are many advantages to nation-states, both stated and unspoken, to head in the direction of a national digital currency. The chief executive of the South African Reserve Bank (SARB) said that this would include more inclusion and economic reach, faster settlements and lower costs.
“If we go the route of issuing a digital currency, the objective would be to take advantage of emerging technologies so that we reap the benefits,” said Tim Masela, head of the National Payments System at the SARB in a statement.
We foresee that these benefits could be realized, which would be good for the transacting public. But of course, the risks have to be borne in mind as well and that’s what we want to balance.
In Africa alone, digital currency use and national propagation seem to be a step ahead of the rest of the world’s governments. At the end of 2015, Tunisia announced that they had already successfully created a blockchain and a digital eDinar.
Senegal announced last year that they have struck a deal with a regional bank for their own national digital currency and this is expected to expand into neighbor nations as well. Nigeria has taken to Bitcoin’s digital currency in a big way over the last year.
“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 on the financial systems,” he said.
Sweden is well along in removing cash from their society and going cashless is expected by the end of the decade. The Ukraine has declared their digital intentions recently. Australia, Canada, and even the United States have had discussions about their own versions of Bitcoin as well over the last couple of years. China is fast-tracking their own national Bitcoin system to prevent “capital flight,” when citizens move their money overseas due to a loss of value, domestically.
One thing that we want to state very categorically is that, in working closely with the industry, we are very conscious about possible regulatory capture. We wouldn’t want to be seen as being captured, where the regulation would be dictated by participants in the market. We will guard our independence so that the regulation is for the good of the system and not necessarily informed by the incumbents’ positions.
Plenty of Downsides for Consumers
This eventuality of a world of national digital currencies is exciting but is ceded with potential unstated consumer downsides. Mass surveillance by banks and governments becomes a plug-and-play scenario. Economic capture is also assured, as one cannot divest themselves from the currency, as there is no way to actually withdraw funds from the system.
Cash is the last private form of payment, and that is being phased out in many nations, creating a future economic system where all transactions are monitored and all user’s finances are kept on a server, which can also be hacked.
According to the IMF, South Africa is the world’s 41st-largest economy, similar to Singapore and Columbia.
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