The African Institute of Financial Markets and Risk Management (AIFMRM) invites applications for a permanent appointment in Financial Technology (FinTech) at Lecturer or Senior Lecturer level. The closing date for applications is 15 May 2018.
Blockchain technology isn’t just about trading cryptocurrencies – it can make everyday life better. The winners at the continent’s largest blockchain hackathon last week proved this, delivering solutions that can incentivise water saving, facilitate cattle trading, increase transparency in voting and corporate governance, and more.
The designers of a unique water saving solution that uses blockchain technology to incentivise users to use less water were the winners of a special prize at the continent’s largest blockchain hackathon held in Cape Town last week.
The Unlock The Block Blockchain Hackathon 2018 was hosted by the African Institute of Financial Markets And Risk Management (AIFMRM) and Linum Labs, and culminated in Cape Town’s first ever Blockchain Symposium. Almost 80 participants from around the world attended.
The special prize was awarded to project SudoTesla, designed to transfer water tokens via the Ethereum network to a smart meter. The tokens are allocated by the designated utility and users are compensated for water that they save.
The special prize awarded to the team, led by Michael Sanne of South Africa, included a month at Absa’s Rise facilities at the Woodstock Exchange in order to further develop their project. Sanne said he hoped it would be possible to bring such a project to fruition one day, even if it was challenging. “Water is a scarce resource, and this solution aims to help manage that resource”, he said.
The overall first prize was split between two teams: the first being BlockPoll, who built a blockchain voting system facilitating better governance in companies, as well as transparency and security in elections. Judge Co-Pierre Georg, Associate Professor at AIFMRM, described their solution as “incredibly slick”.
BlockPoll’s team, consisting of WhenMoon?’s Brandon Kenley Verkerk, Christopher Maree, Iordan Tchaparov and Kavilan Nair, say the design’s main advantages are that it’s decentralised, immutable, and easily auditable. Moreover, they add, it’s easy to use, secure, and open source.
The other winning team was Proof of Steak by Yuna, which Georg described as “a really awesome tech solution to a true African issue”. The team, consisting of Kungela Mzuku, Kyle Roos and Una Singo, allows farmers to use their cattle as collateral on a block-chain, enabling peer-to-peer lending. The team described this as a “uniquely African” and “contextual approach” which would “allow anyone in the world to invest in your cow”. Farmers register their cattle on the blockchain, which functions as an immutable ledger, and investors provide funding to the farmer.
A further special prize for innovation was awarded to team EWAN from Berlin, who built a curation market application.
Prior to the event, Linum Labs’ Devon Krantz said beyond the immediate value of cryptocurrencies, blockchain technology held great potential for “changing systems that already exist”.
“The event has shown us two things, firstly that the applications of blockchain technology in improving people’s lives in Africa are immense and second, it is much easier to build those applications than many people think – we just need to work together,” added Paul Kohlhaas, Founder of Linum Labs.
“This is a historic moment in time,” Georg said at the event. “Our economy will soon embark on a fourth industrial revolution.” Economic leadership would lie in the provision of scarce skills, he said. “There is therefore a need to think outside the box. Something clicked in our minds. This led to the hackathon.” Collaborations and partnerships of this kind, he added, would continue to address the need for scarce skills.
The Unlock the Block blockchain Hackathon was a 10-day long event during which participants learned some of these scarce skills, including how to develop blockchain applications. The first five days were dedicated to a digital “boot camp”, during which participants were exposed to overarching fintech trends and the blockchain tools needed to develop decentralised applications and protocols. Topics covered included Bitcoin, Ethereum and other cryptocurrencies, and sessions were led by industry experts.
At the end of the hackathon, participants were given three days to develop their own blockchain application. The Symposium occurred on the final day.
The Hackathon was sponsored by both South African and international businesses, including Absa, Microsoft, Old Mutual, Status, Foundery, Consensys, Citi, Pick ‘n Pay, UCT and Rise.
Regulators face substantial challenges when evaluating the risks associated with cryptocurrencies. While cryptocurrencies hold significant promise for economic growth in Africa, there is a strong case for cryptocurrency regulation.
The evolution of cryptocurrencies means there is potential to be “incredibly surgical” in terms of regulation and the enforcement of transparency, but regulators are still facing resource constraints and other limitations in their efforts to get on top of this revolutionary new technology.
This is the view of Professor Andrei Kirilenko, Director of the Centre of Global Finance and Technology at the Imperial College of London. Kirilenko was speaking at a panel discussion arranged by the African Institute of Financial Markets and Risk Management (AIFMRM) at the University of Cape Town earlier this month.
According to Kirilenko, a world-leading fintech expert and the former chief economist of the U.S. Commodity Futures Trading Commission (CFTC), the very nature of cryptocurrencies – that is, the fact that they are digital – means their footprint and reporting capabilities are built in, even if these are usually well covered for individual safety and privacy reasons.
This means if regulation were compulsory, transparency and reporting could potentially be easier using digital currencies than otherwise, he argued.
The use of cryptocurrencies has rapidly gathered momentum in recent years. Currently, there are over 1,100 in circulation, which serve different purposes. The best known of these is likely to be Bitcoin; others include Ripple, Litecoin and Ethereum.
In Kirilenko’s view, an ideal environment was created for cryptocurrencies following the 2008 global financial crisis. Rapid technological development, in conjunction with a mass talent exodus, the failure of previous systems and the affordability of computing, meant fintech was given the space to flourish.
“This means it is only a matter of time before they are so widely used that their regulation will be non-negotiable,” comments Dr Co-Pierre Georg, Senior Lecturer at AIFMRM and Director of the UCT Financial Innovation Lab.
The challenge of regulation
As things stand, however, regulation is struggling to catch up with the rise of cryptocurrencies. And because cryptocurrencies differ from each other and do different things, this raises complications regarding regulation, said Dr Georg.
Kirilenko added that despite an appetite for regulation, it has been deprioritised in many areas of the world, because the resources required for regulation require justification to taxpayers and there are frequently more pressing problems. As such, cryptocurrencies are often dealt with on a case-by-case basis.
At present, he explained, there is no law in any jurisdiction that says the regulation of cryptocurrencies is compulsory. However, under individual country laws, cryptocurrencies may not be used to enable prohibited activities. “There are multiple aspects to [the regulation of cryptocurrencies],” he said. “Suppose I’m a regulator. What do I regulate?”
Undermining laundering or misappropriation would mean focusing on anonymity, he said, while concerns about governance would require asking whether assets were potentially vulnerable to asymmetric information, theft or fraud. If it’s a ledger, the regulator would focus on reporting requirements or transparency.
There are “different ways to touch that elephant”, said Kirilenko. “There are different pieces of regulation. If you are going after one, some or all of them, you have to know what would be your main mandate – whether it is a monetary policy mandate, for instance.”
If the central bank issues cryptocurrencies, he said, then it becomes necessary for the regulator to work within the monetary policy mandate. But if he or she is taxpayer-funded, there must be justification for setting resources aside to do that.
A sound reason to devote resources to regulation would be that without it, money could be lost, stolen or open to fraud, dishonesty or abuse. Consumer protection could also come into play. “It is not impossible to imagine initial coin offerings are fraud or borderline offerings and that someone would take the coin and disappear,” he said.
A further justification for regulation could be price determination. But that, he argued, could concern investors. It would be essential to ensure fair prices.
The current state
“These questions have been asked by regulators around the world,” said Kirilenko. “The answers at this point are: we are not sure, we don’t know. We don’t know under which mandate to work, or what part of it to regulate.” To date, most regulators, typically those working in banks, have established groups to examine these issues, he said. This ensures that if an organisation is ever caught off guard, they have some recourse to provide answers.
Consumer protection agencies have also had limited involvement to date, he added, though this could change if a large number of consumer complaints arose.
In larger jurisdictions, organisations dealing in cryptocurrencies can approach regulators and ask to be certified as regulated, which the regulator may approve or refuse. This has occurred in several recent cases, noted Kirilenko.
A few examples include the Securities and Exchange Commission’s refusal to regulate Bitcoin in March 2017, on grounds that “significant markets for Bitcoin are unregulated”. In July, the US Commodity Futures Trading Commission announced that by a unanimous vote of the Commission, it issued an order granting LedgerX, LCC registration as a derivatives clearing organisation under the Commodity Exchange Act. Under the order, LedgerX would be authorised to provide clearing services for fully collateralised digital currency swaps.
By August, CBOE Holdings announced an agreement providing Chicago Board Options Exchange and its affiliates an exclusive global license to use Gemini’s Bitcoin market data for bitcoin derivatives and indices.
“Regulators are not actively pursuing regulation, but they have to react to market participants who come to them and ask them to make a determination on their ability to participate in these markets,” said Kirilenko.
The way forward
Kirilenko believes cryptocurrencies have a great future in funding development, with high potential in financing new ventures and innovation. This, he believes, is because markets themselves are evolving from previous priorities. In this case, legal, transparent and ethical use would become increasingly important.
Derivatives on cryptocurrencies have a “very significant” future, he said, due to their potential to raise capital finance, finance talent in the digital fintech economy, and bypass existing capital markets that are too costly to participate in. “They are also more tailored towards servicing the part of the economy that is different from the economy traditional markets were developed to service – machines or to hire people,” he said. “Financial markets latch onto innovation.”
Meanwhile, calls for regulation globally have been gaining momentum. At the start of November, Australia announced digital currencies could soon be regulated for the first time on grounds that it was “absolutely needed”.
The South African Reserve Bank’s current ‘sandbox’ approach to cryptocurrency regulation is prudent, adds AIFMRM’s Co-Pierre Georg, since many questions around how to regulate cryptocurrencies without stifling innovation remain open. The SARB will have to take a stand, though, on whether it will support the issuance of a central bank-backed cryptocurrency at some point in the not too distant future.
Otherwise, concludes Georg, South Africa risks being left behind as other countries boldly forge ahead and reap the benefits of this highly innovative sector.
The US, Europe and the UK have all moved towards regulating cryptocurrencies, with several US states passing bills that could see regulation passed into law.
In July, the South African Reserve Bank (SARB) said it would begin testing cryptocurrency regulations.
Maryjane Mokgethi, a student on AIFMRM’s MCom in Risk Management of Financial Markets programme, headed to New York to attend the UN Global Leaders Summit. The winning solution, in a UN Global Compact competition, focuses on the problem of food waste and was presented at the Summit this September.
Maryjane Mokgethi giggles when she says, “I had only ever used my passport before to go to Botswana, and now I have been to the UN in New York!” The elated 25-year old has just returned from the UN Global Compact Leaders Summit which took place in iconic Midtown Manhattan in September.
Earlier this year, she entered the UN Global Compact’s Breakthrough Innovation Challenge, which aims to bring together “young intrapreneurs from leading companies to design future sustainable business models powered by disruptive technologies”. No small task, but Mokgethi and her team were up for the challenge.
The competition posed eight questions and students were invited to submit a solution to any question. “We worked on a challenge posed by Nestlé: ‘to enable exponential consumer engagement and behaviour change to contribute towards Nestlé’s strategy to prevent and minimise food waste along the value chain.’ We won, and the prize for the winning solution was a trip to New York to attend the Summit and present our solution alongside Nestlé,” she explains.
Mokgethi and her teammates, Bridget Fundikwa and Wadzanani Nyabeze, two recent chemical engineering master’s graduates from UCT, created a solution to minimise food waste through a mobile app. “We provided a solution to reduce food waste, particularly in developed countries, as this problem is more prominent in developed countries. The intention is to create awareness around food waste and to change consumer behaviour. Some people are not conscious of food waste, and we hope to change this. Many people are socially conscious, but with busy schedules and modern life their behaviour and purchasing patterns lead to waste.”
The team’s mobile app, Bagzielicous, allows consumers to track the expiry of perishable items that they have purchased, to avoid waste. The app is currently being developed by a company that they were partnered with, and they met in New York. “The app is in its final stages of development, and I am excited to witness its success when launched in 2018,” says Mokgethi.
After the presentation, the team was awarded a certificate of excellence for outstanding performance and lasting contribution to the Breakthrough Innovation Challenge. “It was heart-warming to be acknowledged, and I will always hold on to that moment.”
Mokgethi is currently completing her MCom. She has an undergraduate degree in Economics and Finance, and an Honours in Financial Analysis and Portfolio Management, both from UCT. Of her education, she says, “UCT really opened my eyes, and when I worked for a year at an investment manager, I realised that you have to be a well-rounded person, not just good at numbers. You need to be true to yourself. Be socially conscious. Yes, I am studying finance, but at the same time, I want to have a social impact. That is what drew me to AIFMRM.”
AIFMRM proudly sponsored Mokgethi’s New York trip. Dr Co-Pierre Georg, Senior Lecturer and Director of the UCT Financial Innovation Lab at AIFMRM says, “It is not every day that one of our own embarks on an exciting adventure like this.”
“I am so grateful to AIFMRM for sponsoring my trip and supporting me in this once in a lifetime opportunity,” says Mokgethi, and “especially to Co-Pierre Georg, who acted as my advocate and believed in this initiative.”
Georg sees Mokgethi as a significant role model, especially for young women. When asked if she has advice for young women pursuing their dreams, she says: “My story certainly shows that anything can happen! Be daring. Try. Go out of your way to have a well-rounded university experience and life experience. Be socially conscious and engage with people or join university societies that you may not have been exposed to before.”
Ultimately, her hope for the long-term is that we can implement similar apps in South Africa. “As our country becomes more developed; we need to establish sound social awareness around food waste and food security. It will lead to a better South Africa in the future.”
Mokgethi’s UN experience was life-changing, and she says, “the words of the Global Leaders will remain with me for years to come. I am looking forward to the future and aspire to be identified as a Global Leader who pushes beyond the boundaries of technology and creates disruptive change through the face of sustainable business conduct”.
To harness the power of blockchain technology for the continent, we need a new generation of highly skilled professionals to drive its application. South Africa will soon see a first-of-its-kind intensive skills building boot camp and hackathon to achieve just that.
Blockchain is booming in Africa. On the financial side alone, Bitcoin trading hit record highs in South Africa in August as the currency surged to $4,700 a coin. Additionally, Pick and Pay, one of South Africa’s largest retailers successfully trialled Bitcoin as a payment option.
The South African Reserve Bank (SARB) has said it is open to issuing a national digital currency, likely based on blockchain or distributed ledger technology and similar plans are in the pipeline in Senegal and within the West African Economic and Monetary Union (UEMOA).
Analysts believe Africa will be impacted dramatically by the rise of blockchain technology, arguing that it can enhance both efficiency and transparency across sub-Saharan economies. The applications range from micropayment systems to digital identity management or smart contracts, driving a new era of more inclusive growth, job creation, and prosperity.
However, while the technology is flourishing, skills development in the area is not. Moreover, this has prompted two forward-thinking organisations to collaborate to host a first-of-its-kind blockchain boot camp and hackathon aimed at building skills in this rapidly expanding area.
The event will be hosted in Cape Town by the African Institute of Financial Markets and Risk Management (AIFMRM) at UCT and Linum Labs, a blockchain production studio with a focus on blockchain consulting, training and community development.
The hackathon aims to stimulate the development of ideas, prototypes, and applications relating to blockchain technology to solve business problems, particularly within the FinTech sector. “The emphasis is on skills transfer and mentorship within a collaborative and enabling environment,” say the organisers.
“The blockchain is changing the nature of finance. As a result, the need to develop innovative financial products has never been more pressing,” says Dr Co-Pierre Georg, Senior Lecturer at AIFMRM. “The decentralised nature of FinTech and the blockchain means these innovations are often built from the ground up by individuals, start-ups, freelance coders and students – and facilitating interaction between these stakeholders is pivotal for the diffusion of new ideas and technology.”
It is not just not just FinTech being revolutionised, says Andrew Tudhope, Lead Architect at Linum Labs. “This is a paradigm-shifting technology. The community plays a critical role in the direction any blockchain takes, and to have a viable community; you need education and skills transfer,” he says.
Many students with a keen interest in the blockchain do not have the opportunity to learn in a traditional setting, says Georg. “Creating opportunities for people to gain practical skills enabling them to develop on the blockchain is therefore crucial to addressing the skills deficit on the continent,” he says.
The boot camp and hackathon – an intensive 10-day experience which includes skills training, networking, advice on how to turn ideas into businesses, and the opportunity to win cash prizes of up to R100,000 – will be sponsored, and delegates will be chosen on merit through a rigorous application process. Organisers plan for it to become an annual event that sets the benchmark for blockchain technology development on the continent.
Delegates will gain a head start in this rapidly evolving industry, and will be well positioned to drive the application of the technology on the continent, says Linum Labs’ Devon Krantz.
“In South Africa alone, there’s great potential for changing systems that already exist,” she says. “For example, improving solar technology, notably introducing more transparent solar energy transferral. Moreover, transparency, in general, is an exciting possibility: the identities of children receiving the Child Support Grant, for example, could be stored and protected using blockchain. There could be greater transparency in managing social welfare grants.”
Blockchain could be a game changer, agrees Georg. “The nature of the technology: that it is secure and open to all, cutting out the middleman, means it could revolutionise life for people living in low-income countries or fragile states such as are common in Africa. However, this will not happen if we do not take care to develop the skills needed to drive its application on the continent so that it is accessible to more people.”
“We need to make sure that Africa can develop and keep its young talent before they take their highly sought-after skills to China, Europe or the USA,” says Paul Kohlhaas, CEO of Linum Labs.
“The hackathon is a unique opportunity to start this important journey to keep the blockchain booming on the continent.”
For more information on the hackathon please go to http://linumlabs.com/blockchain-hackathon/. Any qualified person interested in learning more about the blockchain is welcome, preference will be given to students particularly those from previously disadvantaged backgrounds.