SouthAfricanregulatorsleadingthechargeindisruptiveinnovation

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Episode summary

SARB ensures stability of the Rand as well as the financial system. They are also the producers of bank notes and coins. The Fintech unit exists to monitor new innovations like crypto assets, ICOs, peer-to-peer lending etc. These innovations are coming from non-traditional players. The Fintech unit plays more of a co-ordination role within SARB and with other regulators, to make sense of these new disruptions.

Crypto assets are not legal tender nor are they currency because they are not issued by a government. The Fintech unit sees them as digital representation of value. Currencies have three characteristics: they are a store of value, a medium of exchange and a unit of account. Crypto does not meet all of these.

The Fintech unit is looking to create an innovation hub to support Fintech. This would consist of a regulatory guidance unit helping with regulatory clarity and a sandbox environment, so innovation can proceed, while appropriate regulation is being created.

The unit sees Fintech more as the innovations that come about, rather than the specific technology or companies that create it. They follow an activity-based approach to regulation ie. if it looks like investments, it should be regulated as such.

The world is becoming more borderless, meaning that we can acquire services from anywhere in the world. These services are increasingly on demand, real-time and mobile. Regardless the need for regulation and safeguarding would still apply. The Bank of International Settlements has been also looking at a global innovation hub.

A digital Rand issued by the Central Bank would be the equivalent of digital cash. Several jurisdictions are investigating a Central Bank Digital Currency (CBDC). The impact of this on commercial banks needs to be considered. The Fintech unit supports of investigating CBDCs considering carefully the problem it solves and potential policy implications.

Libra is the currency that Facebook is helping to launch. Policy making for Libra would need regulators from across jurisdictions to co-ordinate and collaborate. Regulation by design will always be behind innovation. An innovation hub is created to increase the pace of regulation.