Bitcoin can never be an alternative to existing currencies, South Africa's reserve bank governor says.
Lesetja Kganyago, the incoming chair of the International Monetary Fund’s policy advisory committee, says cryptocurrencies pose no threat to the reserve currencies of the world.
The backing of central banks to protect the value of their currencies is crucial, Kganyago said in an interview with Business Insider South Africa.
“If the rand loses value, there is someone you can shout at because they [the central bank] stand behind the currency. Unlike with bitcoin, for instance, and its anonymous creator,” the governor said.
Kganyago is also concerned about the unregulated nature of cryptocurrencies, which could lead to criminal activity including tax evasion, money laundering, and cybercrime.
More than 30,000 people fell prey to cryptocurrency-related cybercrime around the world last year.
Still, South Africa’s central bank has joined other countries, including India, to explore blockchain, the technology behind bitcoin.
Blockchain is best explained as a decentralised ledger of cryptocurrency transactions that is public for all parties to see.
Earlier this month, the Reserve Bank launched Project Khokha, a project with SA’s biggest banks, to test-drive blockchain technology.
The banks will process wholesale payments between them using JPMorgan's Quorum blockchain technology.
Following an initial trial period, the central bank will report back before August on whether the technology is worth the risk. Merchants like takealot.com, KFC, and RE/MAX accept bitcoin as a form of payment. Pick n Pay experimented with accepting bitcoin payments for groceries and services in September.
The Reserve Bank is part of the Bank for International Settlements’ study group that is also exploring the need for central bank issued digital currency. A digital currency backed by the central bank wouldn’t be that different from the bank notes and coins we use today, Kganyago said. The only difference is that digital currencies aren’t tangible.