The South African Reserve Bank (SARB) announced that additional research would be conducted to analyze the project’s outcomes and improve legislative and administrative reactions to Distributed Ledger Technology and Central Bank Digital Currencies. The SARB has finished a technological PoC for the project, making the country come closer to starting up its CBDC.
PK2 is the continuation to South African Reserve Bank’s PK1, introduced in 2018. If you want to make interbank payments, you can use DLT. It tried this and was able to copy the banks’ “SAMOS” real-time gross payment network.
Phase 2, Project Khokha 2 started in February last year and evaluated distributed ledger technology with clearing, trades, and settlement in a PoC ecosystem with sector players Nedbank, Absa, Standard Bank, JSE Limited, and FirstRand, which comprise the IFWG. South African Reserve Bank evaluated the issuing of debt securities and authorized 2 payment choices for settlements: wCBDC and wToken, a kind of personal funds issued by commercial banks.
The PoC created 2 Distributed Ledger Technology systems, one for decentralized trading and the other for central bank digital currency management. A two-directional bridge was also built, comparable to those utilized in Decentralized Finance for transferring crypto between different blockchains, permitting central bank digital currency mobility amidst both systems.
The project’s findings marked the legal, commercial, and technical consequences of DLT in the marketplace. Based on the South African Reserve Bank statement, the system will be consolidating operations previously done by different systems into a unified system, potentially decreasing expense and complication.
According to the research, the novel Distributed Ledger Technology platforms would have to be linked with infrastructure, and the banks would bear the costs for the deployment of another platform. According to the South African Reserve Bank, new guidelines, methodologies, and support networks must be implemented for the Distributed Ledger Technology infrastructure to succeed.
The South African Reserve Bank noted that classic and Distributed Ledger Technology systems might need to start coexisting in the years ahead, noting that shifting to a distributed-ledger-technology-dependent system necessitates a meticulous design and implementation. It may entail operating a distributed-ledger-technology-dependent system in conjunction with the current system for some time, if it isn’t indefinitely.
The central bank digital currency used on networks besides the 2 utilized in the PoC was also stated as a case for more investigations, as were operational hazards connected to the stability and safety of the software bridge over all platforms.
More Research for Project Khokha
South African Reserve Bank said that additional research would be conducted to ascertain the project’s results and the legality of the wholesale central bank digital currency, which would monitor legislative and administrative reactions to Distributed Ledger Technology and Central Bank Digital Currencies in the money system.
Additionally, it suggested the chances of initiating another phase of PK to broaden the achievements of Project Khokha 2 by completing live operations in a sandbox ecosystem for a new use case. Since May last year, South Africa have been conducting initial research on a commercial Central Bank Digital Currency to determine its attractiveness and suitability. The study’s deadline hasn’t been specified, however the South African Bank Reserve estimates it would be within this year.