CAPE TOWN - The SA Reserve Bank (Sarb) has concluded practical tests involving the country’s leading banks to determine how the rand can be tokenised to improve national payments using blockchain technology.
The exercise, known as Project Khokha (isiZulu for pay), was driven by the Reserve Bank’s technical partner ConsenSys and involved Absa, Standard Bank, Nedbank, FirstRand, Investec, Capitec and Discovery Bank.
ConsenSys’s Peter Munnings said Project Khokha was a blockchain version of the Sarb interbank payment system designed to handle large-value payments between banks.
“These payments are typically the sum of lots of smaller payments that happen throughout the day,” Munnings said. They are all grouped together and then at a point the total of all those payments is sent to the Reserve Bank’s interbank payment system for a bulk transfer.”
Project Khokha is part of the central bank’s fintech programme. Sarb deputy governor Francois Groepe said the exercise was aimed at creating a distributed ledger between banks for a domestic payment system backed by central bank deposits.
“This would allow participating banks to pledge, redeem and track balances on the distributed ledger without a centralised central bank system needing to be involved, all while adhering to the performance, confidentiality, and differing hardware requirements of the various banks.”
A private permissioned Ethereum blockchain called Quorum was used to tokenise the rand and transfers were then made between banks in real time with blockchain, using these tokens.
Cryptocurrency traders, however, saw nothing to write home about, saying a centralised cryptocurrency would not bring much to the table.
Richard de Sousa, a partner at AltcoinTrader, said Project Khokha had used the fundamentals of blockchain to create the digital token, that is the rand, but the rand was already digitised.
“We are using it for online banking transfers, so making the rand a blockchain cryptocurrency would be redundant,” said De Sousa.
“Using it to fulfil interbank settlements could prove fruitful as it will allow for faster interbank settlements.
“However, the main point of cryptocurrencies is that they are decentralised. There is little difference when something is centralised between a database and a blockchain.
“It doesn’t bring much to the table, it is a centralised digital token using blockchain, in my view no better than using a traditional database.”
Shireen Ramjoo, chief executive at Liquid Crypto-Money, said decentralised crypto-currencies offered better value than traditional systems, which was the reason why there was an increase in users of cryptocurrencies.
“The purpose of decentralised cryptocurrencies was the need to eliminate central authorities and create an ecosystem of trust between peers to transact independently.
“Another major driver for cryptocurrency users is that decentralised cryptocurrencies are deflationary in nature. Even with governments worldwide incorporating blockchain into current structures, as with Project Khokha, there won’t be a point of discussion in the near future about inflation. Hence creating a centralised crypto-
currency wouldn’t necessarily add more value. This will continue to create a market for many to look at other alternatives.”
Munnings said government-issued digital currency for individuals was still a long way off.
“This is not primarily for technical reasons but more for regulatory and economic reasons. The Reserve Bank is working hard (they have a dedicated team) to establish a policy framework under which these currencies would operate.”