The South African Reserve Bank (SARB) announced today that it would establish the Financial Technology Programme to strategically assess the emergence of new technologies in the industry, and to consider its regulatory implications.
"The main goal of the programme is to track and analyse fintech developments and to assist policymakers in formulating frameworks in response to these emerging innovations," SARB said in a statement.
There are three objectives being investigated: crypto-currencies, 'innovation accelerators', and distributed ledger technologies.
SARB will review its position on private crypto-currencies. This will address regulatory issues such as clearing and settlement risks, exchange control impacts, monetary policy and financial stability, and other matters such as cyber security considerations.
Tax implications, consumer and investor protection, and money laundering activities will also be addressed in the review. It is expected to be completed in the second half of 2018.
The second objective looks at 'innovation facilitators', which the SARB defines as a collective term for innovation hubs, regulatory sandboxes and accelerators. The SARB hopes to conclude this report by the third quarter of 2018.
The third objective is to launch Project Khokha, which will experiment with distributed ledger technologies (DLTs).
"The aim of this project is to gain a practical understanding of DLTs through the development of a proof of concept (POC) in collaboration with the banking industry. The objective of the POC is to replicate interbank clearing and settlement on a DLT which will 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. The SARB is aware of multiple DLTs being experimented with globally," says the SARB.
ConsenSys (an expert on Quorum) is the technology partner that will assist the SARB in the design, setup of infrastructure and running of the POC.
"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.