CAPE TOWN - The South African Reserve Bank released the Project Khoka report which assessed the emergence of technological innovations in the financial sector and shows that the daily volume of the SA payments system could be processed in less than two hours will full confidentiality.
This comes after the reserve bank announced in February that it had established a Financial Technology (Fintech) programme to assess the emergence of technological innovations in the financial sector and consider their regulatory implications.
The programme had three main objectives, all aimed at assisting in the formulation of appropriate policy frameworks for the possible regulation of Fintech.
These include reviewing the Reserve Bank's position on private cryptocurrencies, investigating innovation facilitators and launching a distributed ledger technology (DLT, or blockchain) experiment.
Project Khoka was designed to show how a ‘real-world’ distributed ledger technology (DLT)-based wholesale payment system functions.
The focus of the project was based on providing participants with practical experience on how to use DLT within a realistic environment.
According to the project, the typical daily volume of the payments system could be processed in less than two hours. The payment was also fully confidential. Meanwhile, transactions were processed in two seconds.
Project Khoka was built on Quorum, using Istanbul Byzantine Fault Tolerance (IBFT), Pedersen commitments and range proofs to deliver on the combination of scalability, resilience, confidentiality and finality.
Notably, this was the first time that a proof of concept (PoC) utilised Pedersen commitments and range proofs on a Quorum network using IBFT.
According to Sarb, the aim of Project Khoka was to gain further understanding on DLT developments within a South African wholesale payments context.
The project provided the opportunity to broaden the DLT skills base in the South African banking industry and also presented an opportunity to explore the type of collaborative innovation that is expected to become more common.
Sarb said that this project laid the foundations for future collaborative work which is imperative in a blockchain context.
Despite this, the report based on Project Khoka states that there are many considerations to bear in mind before a DLT-based system can be adopted. Some of these issues relate to the practicalities of implementation, but also to legal and regulatory factors and to the broader economic impact.
Another aim of this project was to understand how South African Multiple Option Settlement (SAMOS) system would integrate with a DLT system. This is basically to provide input to the project.
Sarb said that the direction that this technology will take will be heavily influenced by further developments of this technology and by central banks and other regulators contribution to this expertise of knowledge. “The SARB anticipates continuing work in this area and expects to continue contributing to the body of work in DLT-based systems”, concluded Sarb.