The central bank of South Africa, known as the South African Reserve Bank (SARB), has recently announced a new FinTech initiative. Part of this initiative is something known as ‘Project Khokha’. This will be a blockchain-based PoC project that is being carried out in collaboration with the Ethereum coder collective ConsenSys. This was revealed in an official announcement from the bank. The Brooklyn-based Ethereum blockchain developer will act as the bank’s technology partner. It will enable the ‘processing of wholesale payments using Quorum.’ This is an Ethereum enterprise blockchain, which was developed by EthLab and JPMorgan. EthLab is a developer startup that works on the Ethereum blockchain.
What the Announcement Said
According to the announcement, the project aims to gain a practical understanding of blockchain technology via the development of a proof of concept. The project will take place in partnership with the nation’s banking sector. The aim of the PoC will be to replicate interbank clearing and settlement on the blockchain. Via this project, the SARN and the banking sector will be able to jointly assess the potential benefits and risks that the blockchain holds.
This development seems to be a complete turnaround from what the Governor of the Central Bank said in August 2017. Back then, he stated that issuing a blockchain-based cryptocoin would be too risky a move for the bank.
The SARB has plans to issue a digital token, which will power the interbank settlement PoC. This move will be similar to that which the central bank of Singapore has already done. The central bank of Singapore launched a blockchain project dubbed Project Ubin. This project saw the bank tokenize the Singapore dollar, which is used to fuel the interbank blockchain concept. This project is also based on the Ethereum blockchain, which has shown a lot of potential in recent years.
Word of Caution
The SARB has made it clear that this project does not imply a shift in the adoption of the blockchain as the core technology powering its payment infrastructure. Instead, it views this as a practical experiment that will help it understand the pros and cons of the use of a tokenized asset based on the blockchain, in the transfer of value. A report on the trial project is going to be released in Q2 of 2018.
Despite this statement, it is clear that the financial world is waking up to the massive potential of blockchain technology. If this project is successful, there is a chance that many more central banks in South Africa and even Western nations could adopt blockchain. With major banks like JPMorgan running blockchain trial projects, it is quite clear that the technology is not going away.
What do you think about the launch of this project by the SARB? Will it lead to the massive adoption of blockchain by central banks? Leave us your thoughts in the comments section below.