The South African Reserve Bank (SARB) is reviewing its position on private cryptocurrencies to inform an appropriate policy framework and regulatory regime.
This review forms part of its financial technology programme to assess the emergence of financial technology (fintech) in a structured and organised manner, 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,” the SARB said.
This SARB cryptocurrency review will address regulatory issues such as clearing and settlement risks, exchange control impacts, monetary policy, and financial stability.
It will also consider “other matters” such as cybersecurity, it said in a press statement.
“Through collaboration with the other regulatory bodies, matters such as tax implications, consumer and investor protection, and money laundering activities will also be addressed,” the SARB said.
The SARB expects to complete the review in the second half of 2018.
Apart from reviewing cryptocurrencies, the SARB will also investigate and decide on the applicability of “innovation facilitators” — innovation hubs, regulatory sandboxes, and accelerators — for the SARB.
The SARB hopes to have concluded its assessment of the appropriateness of innovation facilitators by the third quarter of 2018.
Project Khokha — a distributed ledger technology proof of concept
The SARB is further set 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.
ConsenSys 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,” the SARB said.
A public report will be released to explain all the findings, risks and benefits of the associated project during the second quarter of 2018.