The South African Reserve Bank said on Tuesday that it will complete a review into cryptocurrencies, including bitcoin, before the end of 2018.
The objective is to “inform an appropriate policy framework and regulatory regime”, the bank said in a statement.
The review will address regulatory issues such as clearing and settlement risks, exchange control, monetary policy and financial stability, and cybersecurity, it said.
“Through collaboration with other regulatory bodies, matters such as tax implications, consumer and investor protection, and money laundering activities will also be addressed.”
The review will be carried out by the bank’s recently established financial technology (fintech) unit. The review of cryptocurrencies will a big focus area for the unit, it said.
The unit will then investigate and decide on the “applicability of innovation facilitators” for the bank. “‘Innovation facilitators’ is a collective term for innovation hubs, regulatory sandboxes and accelerators. The bank hopes to have concluded its assessment of the appropriateness of innovation facilitators by the third quarter of 2018. Clear and transparent eligibility and participation criteria will be developed to assist in the consideration of applicants into a regulatory sandbox.”
A third objective is 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 in collaboration with the banking industry,” it said.
Proof of concept
“The objective of the proof of concept is to replicate inter-bank clearing and settlement on a DLT, which will allow the bank and industry to jointly assess the potential benefits and risks of DLTs. The proof of concept involves the processing of wholesale payments using Quorum, an ethereum enterprise DLT. The Bank is aware of multiple DLTs being experimented with globally.”
ConsenSys, a global expert on Quorum, has been selected as the technology partner to assist the Bank in the design, setup of infrastructure and running of the proof of concept.
“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,” it emphasised. “A public report will be released to explain all the findings, risks and benefits of the associated project during the second quarter of 2018.”
All three initiatives will help the bank in the formulation of policy frameworks for the possible regulation of fintech, it said.
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