Standard Bank CEO worries retail CBDC could be unfair competition

On Thursday, Standard Bank’s chief executive Sim Tshabalala expressed broad support for central bank digital currencies (CBDCs) but argued that a retail option could result in unfair competition.

South Africa’s Standard Bank is the continent’s biggest and most blockchain-friendly banking group, successfully trialing a stablecoin with Korea’s Shinhanbank in 2021. Yet speaking at the Standard Bank Africa Central Banking Conference yesterday, Mr. Tshabalala voiced his concerns about what a retail CBDC could mean for competition, according to local news outlet ITWeb.

"The key question is whether the retail banking arm of the public sector is subject to the same kinds and levels of regulation as its private sector competitors,” he said. "If so, then all is well. If not, then calling it a CBDC rather than a state-owned retail bank does nothing to mitigate the risk and moral hazards that an unfairly regulated institution could introduce into the financial system.”

Mr. Tshabalala moderated his position by arguing that retail CBDCs have an important role to play in society, for example, by helping to enhance financial inclusion and fight tax evasion and other financial crimes. He did not mention that consumers are aware of the tax evasion angle, which could be a drag on CBDC adoption.

With regard to wholesale CBDCs, the CEO recognized their potential usefulness, noting that “they could exploit the self-verifying properties of blockchain to simplify inter-bank clearing”.

Despite certain big bank doubts about the viability of CBDCs, the South African Reserve Bank (SARB) has been actively researching potential use cases. In 2021, it announced the Khokha 2 project to explore wholesale applications following a successful first iteration in 2018. The central bank has also recently launched a feasibility study to investigate the desirability and appropriateness of a retail CBDC.

As for Standard Bank, its blockchain ambitions have focused on enterprise trade finance networks and Hedera, a public semi-permissioned distributed ledger technology (DLT) network. Hedera was also part of the 2021 stablecoin trial with Korea’s Shinhan Bank, which focused on cross-border payments. Prior to that, Standard Bank had joined Hedera’s governing council. Its othert blockchain initiatives have revolved around cross-border trade finance including participation in Contour, and the now-defunct Marco Polo network..