The Reserve Bank of South Africa stated it will perform extra get the job done to review the findings from the PK2 venture and use it to deliver policy and regulatory responses to DLT and CBDCs.
South Africa has taken yet another stage in the direction of implementing a central financial institution digital currency (CBDC) as the South African Reserve Bank (SARB) concluded a technical evidence-of-idea for the venture.
The venture, termed Project Khokha two (PK2), is the 2nd phase of SARB’s Project Khokha (PK1), which was kicked off in 2018. The venture experimented with distributed ledger engineering (Distributed Ledger Technology – PK). DLT) for interbank settlement, efficiently reproduces the “SAMOS” of banking institutions true-time compound settlement method.
This 2nd phase, PK2 was launched in February 2021 and examined DLT with clearing, trading and settlement in a evidence-of-idea surroundings with business participants Absa, FirstRand, JSE Limited, Nedbank and Standard Bank, who type the Intergovernmental Fintech Working Group (IFWG).
Using this engineering, SARB experimented with issuing debt instruments and enabling two payment selections for settlement, a wholesale central financial institution digital currency (wCBDC) and a tokenized 1. wholesale payment (wToken), a type of personal cash issued by a industrial financial institution.
The evidence-of-idea has designed two DLT platforms, 1 that acts as a decentralized trading platform and the other a CBDC management platform.
A two-way bridge very similar to these made use of in DeFi when sending cryptocurrencies across distinct blockchains has also been constructed, enabling CBDC portability amongst the two platforms.
The project’s benefits highlight the regulatory, small business and operational impacts that DLT will have on the marketplace. A statement from SARB summarized that the engineering would streamline functions carried out by separate infrastructures into a single platform, possibly minimizing price and complexity.
In the report, SARB pointed out that new DLT platforms will will need to be integrated with legacy programs, with the price of implementing the new platform becoming positioned on banking institutions.
New specifications, up to date greatest practices and new assistance programs will will need to be established for the DLT infrastructure, in accordance to SARB. The Reserve Bank described that DLT and legacy programs may perhaps often have to run side-by-side. Specifically:
“The transition to a DLT-based system requires careful planning and execution, and may involve running a DLT-based system in parallel with the existing one for a while, possibly for a period of time. unlimited.”
Technical risks related to the reliability and security of software bridges between platforms are also noted, and the use of CBDCs on networks outside of the two used in the proof-of-concept is also noted. flagged as subject for further consideration.
SARB said further work will be conducted to study the findings from this phase of the project and the legal status of wCBDC, which will be used to inform policy and regulatory responses to DLT and CBDC in financial markets.
It also suggests that another phase of Project Khokha could be started to “build on top of PK2’s operation, execute transactions directly in a sandbox environment in a different use case.”
As of May 2021, South Africa has also participated in a preliminary review of a retail CBDC focusing on “relevance and desirability”.