The South African Reserve Bank (SARB) has set up a FinTech programme to consider innovation facilitators and carry out a proof of concept (PoC) on using distributed ledger technology (DLT) for interbank clearing and settlement.
The main goal is to track and analyse new developments and to assist policymakers in formulating suitable frameworks, with three main objectives set out:
• Reviewing the SARB’s position on private cryptocurrencies to inform an appropriate policy and regulatory regime, addressing issues such as clearing and settlement risks, exchange control impacts, monetary policy and financial stability, and other matters such as cybersecurity. The SARB expects to complete this review in the second half of 2018.
• Investigating the applicability of innovation facilitators - innovation hubs, regulatory sandboxes and accelerators - for the SARB. This assessment should conclude in the third quarter this year, with transparent eligibility and participation criteria developed to assist in the consideration of applicants into a regulatory sandbox.
• Launching ‘Project Khokha’, which will experiment with DLT to gain a practical understanding through a PoC in collaboration with the banking industry. The objective is to replicate interbank clearing and settlement on a DLT to allow the SARB and industry to jointly assess the potential benefits and risks of DLTs. The PoC involves the processing of wholesale payments using Quorum, an Ethereum enterprise DLT.
Quorum expert ConsenSys has been selected as a technology partner to assist in the design, setup and running of the PoC, but the SARB was keen to stress that this does not imply a radical move to DLT for the country’s national payments infrastructure, “but rather a structured approach to understand the implication of using a tokenised asset on DLT technology to transfer value”.
A public report will be released to explain all the findings, risks and benefits of the associated project during the second quarter of 2018.
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