Central bank digital currencies on Andile Ngcabas radar

Central bank digital currencies on Andile Ngcaba’s radar

Central bank digital currencies on Andile Ngcaba’s radar

Businessman Andile Ngcaba has become the latest top executive seeking to capitalise on the emergence of central bank digital currencies (CBDCs).

Ngcaba, who is chairman and founding partner of impact investment management firm Convergence Partners, revealed his plans to ITWeb in an interview after his company last month announced a R182 million investment in 42Markets Group, a financial and capital markets fintech incubator and investment group.

He believes 42Markets is well-positioned to tap into the CBDC market, as Convergence Partners looks to expand its fintech portfolio across the African continent.

CBDCs are a form of digital currency issued by a country’s central bank. They are similar to crypto-currencies, except their value is fixed by the central bank and equivalent to the country’s fiat currency.

“42Markets has got deep skills and knowledge in the fintech space, and we have known them for a long time. These are people that we have known and seen growing in the market,” said Ngcaba.

“They have deep expertise in business process technology, in particular financial and capital markets. I don’t have to emphasise the issue of financial inclusion in the African context. It’s something that is part and parcel of SDGs [sustainable development goals].

“As an impact investor, bringing technology in the capital markets across the continent is something that we, as an organisation, believe is going to change lives.

“A good example is that central banks or reserve banks are looking at things such as CBDCs, and 42Markets is well-positioned to provide those types of technologies. If you look at companies under 42Markets, like Mesh, for instance, it’s a disruptive technology that is now being used in a number of markets.”

Baby steps

While South African big banks have been hesitant to accept crypto-currency, the South African Reserve Bank last year participated in a CBDC initiative known as Project Dunbar.

Project Dunbar proved financial institutions could use CBDCs issued by participating central banks to transact directly with each other on a shared platform.

The central bank also recently embarked on a study to investigate the feasibility, desirability and appropriateness of a CBDC.

This included electronic legal tender for general-purpose retail use, which is complementary to cash.

While CBDCs are not yet fully deployed, Ngcaba pointed out that central banks will inevitably transition to the emerging technology.

“If you look at the industry – we moved from Web1 to Web2. We are now entering Web3, where almost the blending of the real world and the digital world is slowly becoming the same,” he said.

“If you look at your own life, literally everything, or about 60%, of everything you do is online. From an entertainment point of view, professional level point of view, and for basic services that you need – it happens online.

“So, what is happening is that capital markets are now moving with speed to make sure that as we enter Web3, they are able to respond.

“CBDCs are part of the evolution of fiat in terms of the way things are. There was a time whereby you had to go inside the bank to collect money or deposit a cheque. We have transitioned into an environment whereby you do EFT and transact online. That environment became a hybrid between the older environment and the one where you transact online.

“We are now moving fully into the digital space, whereby your entire being can move into digital currencies. If you look at capital markets, you have equities and bonds, etc. Today, there is debate about the digital asset class, as one of the classes that should be considered.

“We already have companies that are building digital asset class products; so, society is moving digital and currencies should also move in that direction. This is inevitable, and it will depend on countries.

“If you look at remittances, for example, you remit money digitally. Imagine if that did not exist? You would have to ask someone to jump into a bus and drop the money then come back. So as digital assets continue to grow, the same goes with digital currencies.”

Andile Ngcaba, chairman and founding partner of Convergence Partners.

Andile Ngcaba, chairman and founding partner of Convergence Partners.

Gaining fans

Ngcaba is not the first top executive to recently speak highly about CDBCs.

Standard Bank chief executive Sim Tshabalala in March expressed qualified support for CBDCs, saying: “In our view, wholesale CBCDs are potentially useful. They could exploit the self-verifying properties of blockchain to simplify inter-bank clearing.

“We also think retail CBDCs could serve a social purpose, particularly by increasing participation in the formal financial system, and by reducing opportunities for tax evasion and other forms of financial crime,” said Tshabalala.

In a recent interview with ITWeb, Hannes Wessels, country manager for Binance South Africa, pointed out that CBDCs will gain popularity going forward.

“I think we need that system where we need government-issued money and private money. I look at this as public money and private money – money issued by government for use in the country, and money issued privately to be used privately and in public for whatever reason. I think those categories will continue to exist in parallel.”

Source: https://www.itweb.co.za/content/8OKdWMDX1OoMbznQ