Cryptocurrency22.01.2025

Big questions about Bitcoin strategic reserve for South Africa

Reserve Bank governor Lesetja Kganyago says that before South Africa could adopt Bitcoin as a strategic reserve asset, a wide-ranging public policy discussion would be required.

Kganyago was asked the question during a panel discussion at this year’s World Economic Forum in Davos.

According to Kganyago, he couldn’t say whether South Africa would buy Bitcoin as part of its strategic reserves, adding that it wasn’t for governments to decide which assets or products people should be using.

“I want to distinguish between the technology that underpins these assets and the assets themselves as a regulator,” stated Kganyago.

“We do not regulate technology. We regulate activity.”

Kganyago explained that if a product behaved like a deposit, lending instrument, or payment tool, it would be regulated accordingly.

He also acknowledged that blockchain technology was very useful and that the South African Reserve Bank was not shying away from it.

“To give you an idea, we piloted blockchain technology in our payment space with finality in central bank money,” said Kganyago.

“We were able to settle transactions that normally take a whole day to process in 46 minutes. So the technologies could be useful. We would look at that and I don’t think that is a problem.”

However, Kganyago said he has a big problem with a lobby that said government should hold a particular asset.

He said the decision to adopt a new reserve asset must be guided by government’s strategic intent.

“There is a history to gold. There was once a gold standard — currencies were pegged to gold,” said Kganyago.

If someone advocates for adopting Bitcoin as a strategic reserve, this raises the question of why it should be chosen over any other asset.

“What about platinum? What about coal? Why don’t we hold strategic beef reserves or mutton reserves or apple reserves? Why Bitcoin?” he said.

“So, it’s a public policy issue that we have got to be engaged in and I would caution against the move where there is an industry with a particular interest in a particular product who would like to impose it on society,” Kganyago continued.

“I would have a fundamental problem with it.”

Kganyago was asked whether he saw South Africa going towards a Bitcoin strategic reserve in the context of U.S. President Donald Trump promising to stockpile the cryptocurrency while on the election trail last year.

Trump said it would be his administration’s policy to keep 100% of all Bitcoin it currently holds or acquires. This includes Bitcoin obtained through asset seizures as a result of criminal investigations.

However, asset seizure experts have warned that this policy would not be practical or legal, as some of the cryptocurrency seized needed to be returned to victims of scams and other crimes.

Brian Armstrong, Coinbase CEO

Panel moderator and Business Insider international executive editor Spriha Srivastava put Kganyago’s question about why Bitcoin should be selected over any other asset to the other participants.

Coinbase co-founder and CEO Brian Armstrong responded, citing Niall Ferguson, a historian, former Harvard professor, senior fellow at Standford University’s Hoover Institution, and author of The Ascent of Money.

“This is still maybe a new idea, but I think it’s clear at this point that Bitcoin is a better form of money than gold,” Armstrong stated.

“It is provably scarce, just like gold, but it’s more portable and divisible. It has higher utility and was the best-performing asset of the last 10 years.”

Armstrong believes it is going to be important for governments to hold Bitcoin over time, as it will increasingly serve as a store of value.

“It might start with being 1% of their reserves, but I think, over time, it’ll come to be equal to or greater than gold reserves.”

Earlier in the panel, Kganyago criticised what he saw as the crypto industry’s attempts to influence financial regulation.

He warned that if pro-crypto regulations are going to be established by ousting politicians from office, the opposite could also very easily happen.

“Mark my words, it will happen that some other group that wants to bring down crypto would do the same thing,” Kganyago said.

“If regulation is going to be established through the power of money, then we have a problem,” he continued.

“That, for me, is a regulatory capture.”

Responding to Kganyago’s comments, Armstrong said the impact of pro-crypto groups in the U.S. showed “democracy working”.

He said that there were plenty of pro-crypto voters in the United States, but not many anti-crypto voters — an opportunity Donald Trump saw and seized.

Jennifer Johnson, the CEO of Franklin Templeton Investments, also responded to Kganyago’s remarks and explained that the United States’ securities regulations were established in the 1930s and 1940s in response to the Great Depression.

“The challenge is you need to be able to go back to what the purpose of the regulation was, which was consumer protection, and acknowledge that the technology is advancing so quickly that you must evolve regulation to meet the technology,” she said.

“That is a big challenge for regulators. But we have to be able to do that because it’s going to take AI.”

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