Blockchain: Seizing the opportunities, avoiding the risks Blockchain: Seizing the opportunities, avoiding the risks
The technology behind Bitcoin is poised to disrupt South African industries, says Deloitte. Blockchain: Seizing the opportunities, avoiding the risks

Say the word “blockchain” to most people and they’ll think of the cryptocurrency, Bitcoin. But this powerful digital ledger technology is poised to make its mark on a much broader scale, with applications for a range of industries, starting with financial services.

The opportunities and risks for South African businesses posed by this disruptive technology came under the spotlight during the recent leg of a global Blockchain Africa Forum hosted by Deloitte earlier this month in Johannesburg and Cape Town.

Cillian Leonowicz, Senior Manager at Deloitte EMEA Blockchain Lab, Ireland, who presented at the roadshow said several of the local companies who attended had displayed a deep understanding of blockchain and the cryptocurrency world in general. “The knowledge here has definitely moved on past the negative historical connotations with Bitcoin and is now focused on the potential of the technology to bring value into their businesses.”

Leonowicz predicted that financial services and banking were likely to lead blockchain adoption in South Africa. “There are banks in South Africa right now looking at use cases for this technology within their businesses.”

Banking on blockchain

“A group of South African banks, including the South African Reserve Bank (SARB), came together last year to test using blockchain for the issuance of syndicated loans. These investigations into effective use cases for the technology will progress and will all contribute to the maturing of the blockchain landscape within South Africa,” said Thys Bruwer, Director at Deloitte Digital South Africa. “We’re seeing development of use cases around payments, lending, insurance, investment, identity services, Know Your Customer, Anti Money Laundering and the enablement of peer-to-peer services over the blockchain.”

“Government is also interested in the technology”, said Leonowicz.

“There is a level of knowledge and understanding within the South African Central Bank around the potential of blockchain to be a positive disruptive force within the country,” adds Bruwer, who went on to quote the bank’s Governor, Lesetja Kganyago: “This technology has the potential of bringing in millions of people who are currently excluded from economic activity. It has the potential of automating so many government processes and makes the delivery of services by governments super-efficient”.

Beyond the hype

Asked whether the promise of blockchain technology had been over-hyped, Leonowicz said, “According to the Gartner Hype Cycle Special Report, blockchain is at close to peak hype, so absolutely, the promise has been and is being over-hyped.  It’s a nascent technology with a lot of potential, but it also needs scale and maturity to replace or augment existing systems within the Enterprise world”.

That said, the blockchain ecosystem is working hard to enable the scale and maturity required to meet even the currently over-hyped expectations of today.  This technology is new, immature, and disruptive but there’s enough awareness of both the gaps and the potential in filling those gaps to enable the delivery of true value to businesses.

Leonowicz said there was enormous potential in South Africa for blockchain technology to provide a tangible difference to South Africans but its adoption and the speed of that adoption depends on a large number of factors, including regulation, investment, the quality of the products being offered and possibly cultural flexibility to accept the changes that those products bring.

“In general, we expect to see greater adoption of blockchain by 2020,” Leonowicz said.


The roadshow highlighted several potential pitfalls for anyone venturing into the blockchain space. One was the requirement for regulatory compliance and this could become more complex if the products being offered span more than one country.

The maturity of the technology within the Enterprise and the availability of both the middleware and expertise could also cause issues, primarily from a risk perspective.

“Security requirements, particularly around key management, are potentially more complex than organisations are currently experiencing and could involve the establishment of new processes and practices which would require external review and advisement to reduce risk and ensure that security needs are met,” Bruwer said.


Turning to the regulation of blockchain technology and related activities, Leonowicz said that globally, regulators were investigating and reviewing the technology.

“Sandbox environments are being made available for blockchain fintech products both from start-ups and existing financial institutions.  This regulatory landscape is made more difficult by the wide variety of components within blockchain, including smart contracts, cryptocurrencies, token management, remittance and settlement offerings just to mention a few.”

In South Africa, as early as 2014, the SARB wrote a position paper on cryptocurrencies, identifying key risks such as credit and liquidity, price stability and money laundering.

“The Governor of the SARB said at Davos in January that ‘South Africa is very good at structuring national conversations and the conversations between the tax sector, the banking sector, and the regulators is actually a very useful conversation that is taking place’.”

A guiding hand

Bruwer said Deloitte was in a position to assist business, government and others to capitalise on the promise of the blockchain while avoiding the pitfalls.

“With the Deloitte EMEA GRID Blockchain Lab and local Deloitte blockchain resources and expertise, Deloitte can deliver standard consultancy and advisory services around blockchain in addition to providing education, training and expertise to businesses and governments on the use of blockchain to deliver value, reduce costs, reduce risks and empower users.

“We can develop use cases, assist with the creation of a business case and work with the clients on the project delivery.  Additionally, Deloitte is excellently positioned thanks to our capabilities across the entire landscape on audit, risk and compliance to ensure that any solutions proposed or delivered are a functioning part of the whole picture,” said Leonowicz.

[Source – Gartner, Image – CC By 2.0]

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