Block Markets Africa at Cryptofest Cape Town 2022
Event: Crypto Fest (30 Sep 2022), Cape Town
Panel: Is the Future of Payments Stablecoins?
Moderator: Rayn Derksen
By: Badi Sudhakaran, Rikki Barnes, Adele Jones, Tobie van der Spuy
Full video: link
“Tobie, I will let you introduce yourself to the audience”
[Thanks Rayn] My name is Tobie van der Spuy, co-founder at Block Markets Africa. We're a Web3 advisory and product partner to central banks, commercial banks, and the general financial service provider industry. Much like our bigger brothers at VALR, we also really want to push forward the adoption of Web3 technology and infrastructure across the planet.
“We agree the cost of simply sending money home is too high. If we look at other use cases in the socio-economic space, what are some ideas that stablecoins could solve for?”
The biggest thing when you want to get people to adopt Web3 is that they need to be able to pay in Web3. If you're going to take a population that's used to their local fiat currency and say to them, “Hey, you now need to first buy crypto like Ethereum or Bitcoin and move into that value system in order to participate”, that's creating a barrier of entry to massive amounts of the market.
If you truly want to create market adoption, what you have to start [with is an] understanding that you need to be able to offer Web3 payments in FIAT currency - and that's what a stablecoin does. The benefit then is that you can participate in Decentralized Autonomous Organization (DAO) structures. If we take Stokvels or SACCOs across Africa that you can participate in through [these] Web3 structures, in a currency you understand and are comfortable with, you're actually able to engage in that.
In other ways, we're seeing fantastic things in terms of industries developing for small merchants, small artists, content creators and NFTs as an example. But again, the barrier is having to go first into Ethereum or Bitcoin before I can access the NFT, art, digital content or a pass or whatever it might be. So the ability to be able to transact easily in and out of my FIAT in a currency that I'm familiar with and comfortable with means that it's easier for me to adopt. The human stories become interesting because I can now transition into this space. Cross border transactions are instant and you can codify [regulations] proactively as well as implement regulatory enforcement. The benefit is that it's something that you can just use, it's just money, and that's the beauty. The moment that you get to Web3 based currency that is just money and value exchange; and I don't have to adapt my mental models into things, I can just participate; that's where it starts changing lives. I think this is the real benefit that we're seeing with stablecoins.
The beauty of regulated web3 stablecoins is actually creating access and bringing access to all this lovely stuff that most of the people at this conference already have adopted. But your grandmother can't do it, your aunt struggles with it, your uncle doesn't understand what you keep on talking about at Christmas dinner. Regulated stablecoins is literally one of the most important aspects that's utilized in order to help those people access all this fantastic stuff that we talk about and the “kool-aid” that we've drunk.
“You've engaged a lot with the regulators, would you say they are taking a proactive approach?”
I definitely think so. Let's just be honest, it took the regulators a few years to catch on to this industry that we've been in. Since 2017 it's become a lot more interesting [to them], but also around May [of 2022] with the UST issues, I think it was a bombshell and regulators around the world took a serious look at cryptocurrency, specifically stablecoins. What's come about is that we're seeing [that] there will be multiple forms of stablecoins and that they will have different forms of regulations.
From a regulatory reserve management perspective, the ideas of reserve ratios and the liquidity coverage ratios applicable for stable coins that are issued by licensed institutions are quite clear. It's similar to how they manage their current balance sheet liability. You have money at a bank and you see a positive balance, [and to that] there's a reserve ratio and a liquidity coverage ratio requirement based on the Basel Act that has to be enforced. In your local regulatory regime, your central bank will set specific additional controls for that, so the mechanisms are there to actually regulate stablecoins. The thing that is happening now that is so exciting is that some of these regulators are able to map the existing model to the new model. This means that they have the tools and the regulatory structures to enforce and understand and regulate this new industry. That leads to adoption.
I just want to note, commercial banks weren't always managed by central banks. Central banks and regulations brought stability. The paper money that I had issued by a specific commercial bank wasn't necessarily stable. This meant that it was hard for me to build a business with that because I didn't know if I could exchange it for value later. It was regulations that gave me that confidence. We're seeing something like this happening now in crypto. Regulators are engaging in this space. For the man in the street, it means that the token they have today will have predictable value tomorrow in the form of a regulated stablecoin. That gives us a foundation to build true economic value and build real innovation to grow the ecosystem in a way that's sustainable and meaningful.
I think the regulators are very proactive now but I don't think they necessarily were previously, even 18 months ago, and I think that they'd admit to that. We have to accept that everyone can change and we're seeing a positive and proactive engagement from regulators, not just in South Africa. Like Rikki [of Firstrand] , I want to note we are very privileged to have the regulator that we do in South Africa. There are things that we can do here that you can't do in other markets because the regulator [there] is not accessible, not proactive and not willing to have engagements or robust discussions about these things. So for those who want to innovate, the regulator is open to be engaged. I think this is a unique opportunity for the greatest innovators around us today to reach out, engage and find out how you can contribute.
“What is the basis of the ZAR stablecoin? At the end of the day, we do need to protect our currency and our economy.”
I think a ZAR stablecoin would enable the adoption of Web3 innovation in our market. There's probably a 100 times larger audience that is interested in a ZAR stablecoin in South Africa than there is in the investment capacity of crypto.
ZAR stablecoins allow the adoption of Web3 services, not just for investment but for payments, building mutual funds and collective investment structures such as building roommate agreements that execute automatically. It becomes part of daily life. So, I differ with Badi [of VALR] there a little bit. I think the year 2023 is the year of the ZAR stable coin. I hope I'm right, but I'm very positive about ZAR stable coins in South Africa.