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Standard Bank CEO endorses central bank digital currencies

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 16 Mar 2023
Standard Bank chief executive Sim Tshabalala.
Standard Bank chief executive Sim Tshabalala.

Standard Bank chief executive Sim Tshabalala has expressed qualified support for central bank digital currencies (CBDCs), but also said there were “strong warrants to be sceptical” about the value of privately-generated crypto assets.

Speaking at the two-day Standard Bank African Central Bank Conference (ACBC) that ends in Johannesburg today, the big-four bank says Tshabalala said it was not clear how privately-generated crypto assets met a legitimate social need, and also there was strong evidence they make it easier to hide or launder money.

This, he said, pointed to the risk that crypto deposits or transactions could create for banks.

South Africa's Standard Bank Group is the largest bank in Africa, with total assets worth nearly $171 billion.

A CBDC is a digital currency issued by a central bank, rather than by a commercial bank. It is also a liability of the central bank and denominated in the sovereign currency, as is the case with physical banknotes and coins.

While South African big banks have been hesitant to accept crypto-currency, the South African Reserve Bank (SARB) last year participated in a CBDC initiative known as Project Dunbar.

Project Dunbar proved financial institutions could use CBDCs issued by participating central banks to transact directly with each other on a shared platform.

The central bank also recently embarked on a study to investigate the feasibility, desirability and appropriateness of a CBDC.

“CBDCs are an entirely different matter. In our view, wholesale CBCDs are potentially useful. They could exploit the self-verifying properties of blockchain to simplify inter-bank clearing. We also think retail CBDCs could serve a social purpose, particularly by increasing participation in the formal financial system, and by reducing opportunities for tax evasion and other forms of financial crime,” said Tshabalala.

He added it was not clear at this stage how retail CBDC balances held with commercial banks differ from other deposits, or how CBDCs balances held by an individual or a firm directly with the central bank differs from the central bank turning itself into a retail bank.

Tshabalala said he was not making an argument against CBDCs, as state-owned retail banks or central banks that are also retail banks were not unusual or unheard of.

“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 sectors competitors. 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."

SARB governor Lesetja Kganyago delivered an opening address at the ACBC 2023, which is being attended by central bank governors and policy-makers from 14 African countries, under the theme: “Strengthening Africa’s partnerships”.

Among senior government leaders attending is the prime minister of Namibia, Sara Kuugongelwa-Amadhila.

Tshabalala concluded his welcome remarks by expressing Standard Bank’s “very bullish” outlook for the Africa free trade area to facilitate the movement of goods, people, ideas and capital between countries on our continent.

“We support all efforts in that direction, and I am very excited for that prospect,” he said.