The South African Reserve Bank (SARB) does not currently see the need for special regulations to deal with payment systems being built into WeChat, WhatsApp, and Facebook.
This comes after the SARB announced its intention to review its stance on cryptocurrencies earlier this year.
When asked whether it will conduct a similar review for payment systems making their way into social media services, the SARB said it has adopted the Financial Stability Board definition of “fintech”.
“[Fintech is] technologically-enabled financial innovation that can result in new business models, applications, processes, products, or services with an associated material effect on financial markets and institutions, and the provision of financial services,” the SARB told MyBroadband.
Based on its initial analysis, the innovations from Facebook and WeChat do not fit that definition.
Where distributed ledger technologies like Bitcoin open a new frontier, those from social media companies use existing infrastructure such as card payment systems.
“These innovations do not fundamentally change existing business models, and are therefore evaluated through existing regulatory frameworks.”
Experimenting with blockchain
In addition to conducting a review as part of the Intergovernmental Fintech Working Group, the SARB also plans to experiment with distributed ledger technologies through Project Khokha.
Its goal with the initiative is to replicate interbank clearing which currently runs on the South African Multiple Option Settlement system.
The SARB has partnered with Consensys to implement a permissioned blockchain called Quorum, which is based on Ethereum, for this.
Eight banks have signalled interest in being nodes on the network and tests of the system have begun.
The test is intended to allow the SARB and the banking industry to assess the potential benefits of distributed ledger technologies in collaboration with one another.