Governor warns: Crypto currency neither money nor legal tender
Central bank however moves to integrate Fintechs
Risks associated with cryptos need to be mitigated – banker
Bank of Botswana (BoB) Governor, Moses Pelaelo, has warned those who participate in crypto currencies to do so at their own risk and not expect any protection from the central bank.
This is because, as he explained, crypto currencies are neither money nor legal tender, adding that these assets are currently limited in supply and are very volatile.
The governor was speaking this past Tuesday at a Fintech workshop organised by the central bank together with the International Monetary Fund (IMF) and Bank of Canada (BoC).
This type of currency is defined as a form of digital currency that uses cryptography to secure transactions; the most popular being Bitcoin. In the recent past, there has been a surge in the promotion of the crypto currencies, particularly on the internet where they are largely marketed.
While the Governor has acknowledged the role of Fintech in today’s world, it appears, from a regulatory perspective, BoB is reluctant to engage in this type of currency.
Kirsten van Driel from the Netherlands Bank said while crypto’s and tokens could be a new means of payment and a possible way of market, risks associated with financial and economic crime should be addressed.
Van Driel said there is a need to regulate different market players that comprise the crypto ecosystem to alleviate risks associated with crypto’s and tokens.
However, the central bank is ready to move with times and integrate Fintechs, which is the short of financial technology, in its regulatory framework. Pelaelo said the role of central banks is being affected by the financial technology, or fintechs which is the adopted term for this process.
The term Fintech simply describes the process of using technology to deliver financial services and products to consumers. And for this reason, Pelaelo told delegates from the region and abroad that BoB takes interest in the development of financial technology.
The governor said currently they are in the process of propagating the Financial Services Electronic Payment System Act in order to have a new payment system law which obviously incorporates Fintech.
He said central banks should not stand on the way of Fintech growth. The upsurge in the use of technology to take services to the customers is said to be forcing commercial banks to adopt technology or enter into partnerships with Fintech companies.
“Fintech is a reality and provides exciting opportunities and central banks will facilitate and promote provision of orderly services in a resilient environment,” said Pelaelo. For the Fintech to reach its potential, the most important thing that should be taken care of is the regulatory environment to accommodate this technology.
Research Advisor at Bank of Canada, Francisco Rivadaneyra said today’s regulation is based on institutions, and not on activities, something which was also shared by Pelaelo. He noted that new applications of financial intermediation and new organisational forms of intermediaries will pose challenges to regulators.
Rivadaneyra said banks should move swiftly to integrate fintechs, saying fintechs will become more like banks. He explained that Fintech will make market transactions cheaper than within the bank.