South Africa’s Central Bank Sees Ethereum Blockchain Only as ‘Backup’
The South African Reserve Bank (SARB), South Africa’s Central Bank, has concluded a multi-bank project to test bank-to-bank payment transfers using the Ethereum based platform, Quorum.
Project Khokha is a collaboration of eight South African banks including SARB, Absa, Capitec, Discovery, Investec, FirstRand, Nedbank, and Standard Bank.
70,000 Transactions in Two Hours
The project used the Ethereum blockchain platform Quorum. It aimed to replicate South Africa’s current bank-to-bank payment platform, the South African Multiple Gross Operation Settlement System (SAMOS), using the distributed ledger technology of blockchain.
After a 14-week realistic trial of the bank-to-bank clearance and settlement system, the project has been deemed a success. It replicated transactions rather than using actual transactions but proved that the 70,000 daily transactions handled by SAMOS could be completed using blockchain technology within two hours.
In the trial, each bank involved had a node, or a participating computer, in the Project Khokha Ethereum network. Public cloud servers from Microsoft Azure and Amazon Web Services were also utilized Extra server capability was added to power the computations needed to verify the transactions.
The network was tested with SARB’s node verifying every transaction between the banks and with every bank on the network verifying all transactions. According to SARB the process and validation provided by Quorom delivered a combination of “scalability, resilience, confidentiality, and finality.”
The report published after the tests describes Project Khokha as an initiative in “collaborating for innovation and therefore:
Both the process, as well as the outcome of the project, contribute to the SARB’s goals. The decision was made to assess the use case for DLT in wholesale payments and interbank settlement and thus build on and extend the work done in other parts of the world.
A Backup, Not a Replacement
SARB concluded that a further study is required to establish if distributed ledger technology (DLT), or blockchain technology, is suitable for interbank settlements. The central bank states that key considerations will be how support frameworks integrate, and the legal, regulatory and compliance factors.
According to reports, SARB’s Deputy Governor Francois E. Groepe expects a blockchain-based system to support the existing settlement system as a backup fourth layer if implemented, rather than replacing it.
In May 2018, SARB and Groepe announced that cryptocurrencies do not conform to the traditional definition of money and SARB would prefer to use the term “cyber-token”.
JP Morgan, Quorum’s creator, was considering a spin-off of Quorum to increase its wider adoption, according to reports in March 2018, after its success in global blockchain pilots.
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