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South African Central Bank Develops Internal Fiat Token Payments

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South African Central Bank Develops Internal Fiat Token Payments

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South Africa’s Central Bank (SARB) has conducted a pilot of a Proof-of-Concept (PoC) for an interbank payment system adopting a fiat token, using Ethereum-based private blockchain Quorum, writes Cointelegraph.

According to an SARB report dubbed ‘Project Khokha’, the aim is “to build a proof-of-concept (PoC) wholesale payment system for interbank settlement using a South African Rand token on distributed ledger technology (DLT)”, while also investigating interconnected issues such as the platform’s scalability, resilience, confidentiality, and finality.

Blockchain incubator ConsenSys has joined with seven South African banks in the trial as a technical partner, as have the international audit and accounting firm PricewaterhouseCoopers Inc (PwC) as a support partner.

SARB centrally coordinates South Africa’s existing Real Time Gross Settlement System (SAMOS), which operates on a perpetual basis to settle all interbank obligations in real time in central bank money.

Each bank participating in the new project is responsible for configuring its own node on the network and would mint tokens on a blockchain rather that printing fiat to settle bank asset obligations.

Specifically, the trial tested a version of Quorum that uses an Istanbul Byzantine Fault Tolerance (IBFT) consensus mechanism, testing two encryption methods – Pedersen commitments and range proofs – that SARB claims have never before been used on a Quorum network using IBFT, reports Cointelegraph.

Trustnodes cites a Consensys spokesperson who explained that Pedersen commitments hold balances in a random number format so that the balance of each participant is concealed. The central bank would have its own decrypting key for monitoring liquidity monitoring and regulatory oversight.

SARB notes that both methods are fast and the pilot system, therefore, managed to successfully process SAMOS’s high-value payments transaction volumes across distributed sites within the required time window. SARB’s report concluded the system could “have considerable implications”, while noting that “cyber-tokens don’t meet the requirements of money”.

The South African central bank has established its own self-regulatory organization to oversee crypto industry developments aimed at preventing “systemic risk”, although the bank stressed it was cautious not to “throttle growth”.

Industry growth hasn’t necessarily been completely thwarted in South Africa; a Cape Town-based company worth around USD 14.5 billion is expected to introduce a new cryptocurrency exchange in the country, though due to the regulations being unclear, the new company will follow the frameworks set in place for platforms in New York.

 

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