South African financial organisations are exploring the potential use cases for Blockchain in their operations, but are exercising caution in its adoption. So says John Singh, a senior systems analyst and head of the Institute of Information Technology Professionals South Africa (IITPSA) Blockchain Special Interest Group (SIG) in KwaZulu Natal.

Singh was speaking last week at the first IITPSA SIG meeting to be delivered as a webinar, to curb the spread of COVID-19. He reported back on the recent Blockchain Africa conference in Johannesburg, wrapping up the presentations and giving his own insights on the Blockchain environment.

With leading financial institutions well on their journey to assess the use cases and regulatory  implications of Blockchain in financial systems, and a growing interest in cryptocurrency trading in Africa, Singh believes there will be a strong demand for Blockchain and cryptocurrency skills in future: “It’s definitely an area young South Africans could look at. One of the amazing things is that even if it is not gaining traction in South Africa yet, it can still be a way into a great career. This a true global technology with people doing open source development that is not centralised and not located in any one country.

“The initial development and testing of Bitcoin was all done remotely with only communication in email, and this is how the community does things. Furthermore it uses important cryptography standards, which in itself is a valuable skill in the area of security. The learning curve is steep but the skill gained will be enormous and can be used in many other areas of IT,” he says.

Bitcoin to outlast the rest

Singh highlighted key presentations at the conference, including one by International cryptocurrency trader and consultant Tone Vays, who spoke about cryptocurrency trading and Bitcoin in particular. “Vays showed that Bitcoin has seen a strong upward trend in the past few years, despite a number of negative impacts, and he is adamant that it will be the only cryptocurrency left after the others have disappeared,” Singh said.

He noted that Vays was critical of the large number of Blockchain projects across the world, saying Bitcoin’s value would never diminish. “Its value is that it is unconfiscatable, uncensorable and uninflatable, plus it will soon be greatly improved by new technologies to improve scalability and fungibility/privacy. However, it does still struggle with price volatility and coin security – or private key storage,” Singh reported.

Richard de Sousa, founder and CEO of local cryptocurrency exchange AltCoinTrader, was positive about cryptocurrency growth in South Africa. Says Singh: “Richard de Sousa discussed decentralized finance, noting that the traditional banking sector is very restrictive, particularly when the economy is bad. He highlighted that the cryptocurrency world offers decentralised loans that are not a traditional system of debt.

For example, Ethereum could be used as collateral for a person to take out 66% of the collateral as a loan in the stable coin DAI through a smart collateral debt position (CDP) contract. The person might then exchange this for cash. I don’t recommend doing this kind of deal at the moment, because they are quite complex, but it illustrates how these kind of products can assist people. You also have to be aware when you open a CDP that the price of Ethereum does move up and down quickly.”

Blockchain use cases in the spotlight

Blockchain technology to underpin financial services, improve supply chain systems and enable digital Self-Sovereign Identity came under discussion at the conference, Singh said.

“Anrich Daseman, senior fintech specialist at the South African Reserve Bank (SARB), said SARB had come up with its own lengthy definition of cryptocurrency, and was exploring use cases including buying and selling, ICOs, payments, derivatives and funds, and also market support. He notes that SARB was advanced in the regulatory review process and had produced recommendations such as that crypto asset service providers should become accountable institutions in terms of AML/CFT requirements, that crypto assets be declared a financial product/service, and that an exchange control regime should be introduced for this environment,” Singh said.

Gary de beer, application development specialist at Bankserv Africa outlined the aims of the South African Financial Blockchain Consortium Working Group building Self-Sovereign Identity (SSID) solutions for institutions and individuals. Said Singh: “He said there was a growing need for a standard for identification in the digital world. In a Blockchain SSID solution, there would be no need for a verifier in order to trust the issuer, as there would be decentralised identifiers in a public Blockchain.”

Akhona Damane, manager of the Office of Digital Advantage at CSIR (Council for Scientific and Industrial Research), noted that there was scope for more R&D and innovation around Blockchain and cryptocurrency in South Africa. Said Singh: “He said that in the Blockchain arena, very little was happening at university level, and that South Africa had very limited technical Blockchain skills resources, but that there was huge potential for South Africa to make its mark at all levels in this environment.”

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