South African Central Bank Successfully Tests Blockchain-Based Interbank Payments System

According to the latest press release by South Africa’s Reserve Bank (SARB), the central bank has successfully tested ‘Project Khokha’ which is a proof-of-concept trial for interbank payments and settlements using the Ethereum-based enterprise blockchain platform called Quorum.

The report also notes that SARB has successfully completed this trial within 14 weeks while settling 70000 daily payment transactions just in a period of two hours with each transaction taking an average of 1-2 seconds time.

In the pilot testing, the bank’s goals were successfully achieved with the primary focus being “to build a proof of-concept (PoC) wholesale payment system for interbank settlement using a tokenized South African rand on distributed ledger technology (DLT).”

The Project Khokha was also aimed at digging into the “interconnected” issues regarding the platform’s scalability, resilience, confidentiality, and finality. The pilot saw the participation from seven different members from the consortium of banks which included Absa, Capitec, Discovery Bank, FirstRand, Investec, Nedbank and Standard Bank. Blockchain incubator ConsenSys was the technical partner while international audit and accounting firm PricewaterhouseCoopers Inc. (PwC)  behaved as a support partner.

However, SARB has clearly stated that the successful testing of prop-of-concept doesn’t mean that it would be replacing the existing real-time gross settlement (RTGS) system with the blockchain solution. The central bank said that still some additional survey is required for the establishment of the regulatory and compliance systems in place.

The central bank said that the "Key considerations that need to be addressed include the evaluation of supporting frameworks and other systems that integrate with the RTGS system, as well as the legal, regulatory and compliance factors. ... A fully live DLT-based payments system is not currently planned in South Africa.”

As per the report, Project KhoKha made use of Range proofs and Pedersen commitments. TrustNodes explains that this concept works as “a method to hold balances in a random number format so that you cannot tell the balance of each participant,” thereby ensuring privacy and confidentiality.

the project also helped in achieving smaller goals including “to build on the initiatives previously undertaken by global peers and to gain further insights on DLT developments in a South African wholesale payments context.”

The statement further said that the project provided an excellent opportunity “to explore the type of collaborative innovation that is expected to become more common.”