South African Reserve Bank Takes A Step Closer To National Digital Currency

The South African Reserve Bank, in collaboration with the Intergovernmental Fintech Working Group, this week released a second report looking at the use of distributed ledger technology for interbank payments settlement, taking it one step closer to a national cryptocurrency.

Project Khokha 2 was launched just over a year ago, in February 2021, and the participating financial institutions were Absa, FirstRand, Nedbank, Standard Bank and the JSE.

While global financial systems have steadily progressed over the last 50 years, moving from physical ledgers to digital ledgers, the next step is tokenisation – where different traditional assets such as money and securities are represented as tokens on distributed ledger technology (DLT) platforms. One of the most popular applications associated with DLT platforms is blockchain technology, which houses cryptocurrencies such as bitcoin and ethereum.

“Several central banks are exploring the viability of tokenised central bank money in financial markets. Such exploration is important given the growth in technological innovation and the use of new forms of payment instructions,” says Lesetja Kganyago, the governor of the SA Reserve Bank (Sarb).

Project Khoka 2 saw the creation of two forms of tokenised money to allow for settlement. The first was a tokenised form.