As part of its Digital Payments Roadmap, the South African Reserve Bank (SARB) confirmed that it is progressing its central bank digital currency (CBDC) work as part of Project Khokha 2x. This involves a wholesale CBDC and bank-issued stablecoins, which will be used for regional payments in Africa. Additionally, SARB set a two year timeframe for supporting domestic stablecoins as part of a sandbox.
There was no mention of a retail CBDC, something that Standard Bank’s CEO pushed back on last year. Previously Standard Bank ran its own stablecoin trials with Korea’s Shinhan Bank for cross border payments on the Hedera DLT. Those trials continued with other participants and parts of the stablecoin code were open sourced.
Also last year, Gerhard van Deventer, a fintech expert at SARB, discussed Khokha 2x saying one interest area was integrating with trade finance platforms. In the meantime, multiple blockchain trade finance solutions have shuttered. Standard Bank participated in the Letter of Credit platform Contour, which closed last November. Van Deventer mentioned potentially using a wholesale CBDC as collateral for letters of credit.
When it came to bank-issued stablecoins, the central bank had not decided whether settlement would happen on a private network or by integrating with real time gross settlement systems. However, interoperability was considered important because of the belief in a multi-DLT world.
During 2021/22 SARB ran Project Khokha 2, a wholesale CBDC trial for securities settlement. That also involved a commercial bank money stablecoin backed by central bank deposits. While there were several findings, the report on the proof of concept didn’t draw strong conclusions. In fact, it didn’t conclude whether there was a need to move forward.
Talking about Khokha 2 (rather than 2x), van Deventer said, “This was an exploratory project and, among other reasons, regulators typically follow the market, and there are questions about whether we should set a direction.”
75 crypto VASPs approved
In related news, yesterday South Africa’s Financial Sector Conduct Authority approved 75 crypto asset service provider licenses. While that sounds like a large number and potentially unwieldly for oversight purposes, there were more than 370 applications.
