An examination of blockchain technology and Venezuela’s sovereign-based cryptocurrency including the effects of implementing a sovereign-based cryptocurrency in developing countries.
Moodley, Jenelle Shenice.
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After the 2008 financial crisis and the failure of the banking system there was a need to develop alternate payment systems where there was no intermediary involved. In 2008, Bitcoin was developed by Satoshi Nakamoto, and it did not require an intermediary. The invention of Bitcoin and cryptocurrencies in general, has numerous advantages that can be beneficial to society. Venezuela, a developing country, created their own sovereign cryptocurrency as an attempt to ease the economic strain that burdens the country. The main focus of this research is to examine cryptocurrencies and blockchain technology by looking at Venezuela’s Petro as the model to assess whether such a development would be beneficial to a developing country such as South Africa. In addition, any risks that are attached to this invention will be examined. his research was based on the qualitative approach. Various journal articles, online articles and legislation was consulted to assist with the research of this paper. This research was aimed at assisting the relevant stakeholders of developing countries such as South Africa since such countries are facing economic crises. The Petro which was introduced by Venezuela has been critiqued to have numerous flaws due to the lack of research and investigation by the Venezuelan government. Furthermore, such a development defeats the purpose of a cryptocurrency. The South African Reserve Bank experimented with distributed ledger technology which is based on the blockchain, where interbank transactions were simulated. Although the experiment was successful, the South African Reserve Bank stated that such a system would not be implemented currently as more research needs to be conducted. Considering the various implications, it was concluded that introducing a sovereign cryptocurrency would not be viable and feasible in a country like South Africa. This research paper recommends that the developing countries consider implementing blockchain technology in various institutions as this technology has many uses and advantages such as assisting with the voting process, as well as minting citizen’s information. A further recommendation is for the South African Reserve Bank to research the area of blockchain technology in the banking system as this would decrease interbank transactional costs thereby allowing more transactions to be completed in a shorter amount of time.