The South African Reserve Bank has set out the primary objectives of its recently-established fintech task force, assigning priority to cryptocurrency regulation, sandbox and accelerator assessments, and blockchain experimentation.
The central bank last month announced the formation of a dedicated full-time three man fintech unit to monitor the impact of new technology developments on deposit taking, payments, lending, insurance, and investments and reporting directly to deputy governor Francoise Groepe,
The first objective of the unit will be to review the Sarb’s position on private cryptocurrencies, addressing regulatory issues such as clearing and settlement risks, exchange control impacts, monetary policy and financial stability. Cybersecurity, tax implications, consumer and investor protection, and money laundering activities will also be scoped out. The SARB expects to complete the review in the second half of 2018.
This will be followed with a third quarter report into the establishment of a regulatory sandbox and innovation accelerator, setting out eligibility and participation criteria for future use cases.
Finally, the central bank intends to launch an experimental DLT project dubbed 'Project Khokha' to develop a proof-of-concept application in collaboration with local banks.
"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," says the Sarb. "The POC involves the processing of wholesale payments using Quorum, an Ethereum enterprise DLT."
The bank has contracted with ConsenSys to assist 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," the bank cautions. "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 the findings during the second quarter of 2018.