The South African Reserve Bank (SARB) has released a report detailing the successes of its ‘Project Khokha’, an extensive trial of distributed ledger technology involving seven banks over a period of three months. Absa, Standard Bank, Capitec, Discovery Bank, FirstRand, Investec and Nedbank – were involved in a proof-of-concept test that used Quorum, an “enterprise-focused” version of Ethereum, to replicate interbank payments and settlements. De Nederlandsche Bank (DNB) has also released the results of their own three-year experiment on using a blockchain based payments system, although their report concludes that DLT fails as a realistic replacement for existing financial infrastructure.
The SARB and DNB have resoundingly rejected the possibility of migrating their payments system onto the blockchain platform, although for vastly different reasons. The SARB insists that not only the ‘practicalities of implementation’, but also the ‘legal and regulatory factors and to the broader economic impact [of DLTs]’ have to be resolutely addressed before any discussions about producing a blockchain platform can move forward. On the other hand, the DNB have shot down propositions that a blockchain based payments systems will bring about any significant cost, efficiency or volume benefits, noting that their proto-platform has failed to excced the Eurosystem’s interbank settlement network Target2 in all aforementioned metrics.
Despite having arrived at different conclusions on the utility of DLT in improving the speed and accuracy of transactions, both central banks agree that the blockchain is better off as a complement rather than a replacement of interbank payments systems that are currently in place. The DNB believes that blockchain can improve the resilience of financial markets to external attacks, while the SARB has clarified that the DLT trial will ‘provide a better understanding of how the interbank settlement system would integrate with the Quorom blockchain platform’.