South African Reserve Bank mulls cryptocurrency regulations
The South African Reserve Bank (SARB) is reviewing its position on private cryptocurrencies as it looks for an appropriate policy framework and regulatory regime.
Like many other regulators and banks around the world, cryptocurrencies are getting a rougher ride. Laissez-faire? Leave it out. It’s all gone hardball.
Cryptocurrencies have also had some bad press recently. Two examples are the SEC stopping an alleged AriseBank ICO scam in the US; and hackers stealing $534 million from the Coincheck cryptocurrency exchange in Japan.
In terms of SARB, its recently established “Financial Technology Programme” will focus on three primary objectives.
The first one is the aforementioned cryptocurrencies and it will address regulatory issues such as “clearing and settlement risks, exchange control impacts, monetary policy and financial stability, and other matters such as cybersecurity considerations”.
Through collaboration with the other regulatory bodies, matters such as tax implications, consumer and investor protection, and money laundering activities will also be addressed. SARB expects to complete the review in the second half of 2018.
The second objective is to investigate “innovation facilitators” – a new form of jargon to describe innovation hubs, regulatory sandboxes and accelerators. SARB hopes to have concluded its assessment by Q3 this year.
The third objective is to launch “Project Khokha” which will experiment with distributed ledger technologies (DLTs) and see ConsenSys assist SARB in the design and setup of the infrastructure.
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 PoC will replicate interbank clearing and settlement on a DLT which will allow SARB and the industry to jointly assess the potential benefits and risks.
The POC involves the processing of wholesale payments using Quorum, an Ethereum enterprise DLT. ConsenSys will help out here.
SARB makes it clear that 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”.
A public report on this will be released during Q2 2018.
By the way, “Khokha” may be a reference to IsiNdebele, a language of the Matabele / amaNdebele people of Zimbabwe and spoken in Southern Africa. It means to “draw out” (such as a word) or “pull out”. Perhaps hinting at the experimentation angle of the project. SARB doesn’t say.