The CEO of South Africa’s Standard Bank’s Sim Tshabalala, has shown support for central bank digital currencies (CBDCs) but expressed concerns that a retail CBDC could potentially create unfair competition.
Speaking during the Standard Bank Africa Central Banking Conference, Tshabalala stated that if a retail CBDC is launched, it would need to be done in a way that does not disrupt the banking system or create unfair competition.
Standard Bank, which is the largest and most blockchain-friendly banking group in Africa, previously trialed a stablecoin with South Korea’s Shinhanbank. Despite its support for CBDCs, Tshabalala stated that a retail CBDC could lead to issues with competition.
“The key question is whether the retail banking arm of the public sector is subject to the same kinds and levels of regulation as its private sector competitors,” he said.
“If so, then all is well. If not, then calling it a CBDC rather than a state-owned retail bank does nothing to mitigate the risk and moral hazards that an unfairly regulated institution could introduce into the financial system.”
Despite his concerns about unfair competition, Mr. Tshabalala acknowledged the potential benefits of retail CBDCs, such as promoting financial inclusion and combating financial crimes like tax evasion. However, he did not address the issue of whether consumers would be receptive to using a CBDC for tax compliance purposes.
He also noted that wholesale CBDCs “could exploit the self-verifying properties of blockchain to simplify inter-bank clearing.”
Although some large banks have expressed concerns about the feasibility of CBDCs, the South African Reserve Bank (SARB) has been actively researching potential use cases. In 2021, SARB announced Khokha 2 project to explore wholesale applications, building on a successful first iteration in 2018, with the apex bank looking at interoperability of CBDCs and stablecoins in the banking sector by 2023.
Project Dunbar, with SARB as one of the 4 participating central banks globally, proved financial institutions could use CBDCs issued by participating central banks to transact directly with each other on a shared platform.
Additionally, the central bank has launched a feasibility study to examine the suitability and appropriateness of a retail CBDC.
Standard Bank has focused its blockchain efforts on enterprise trade finance networks and Hedera, a public semi-permissioned distributed ledger technology (DLT) network. The bank has joined Hedera’s governing council and participated in the 2021 stablecoin trial with Korea’s Shinhan Bank, which aimed at cross-border payments.
Other blockchain initiatives of the bank have centered around cross-border trade finance including participation in Contour blockchain and the now-defunct Marco Polo network.
South Africa’s Standard Bank Group is the largest bank in Africa with total assets worth nearly $171 billion.
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