South Africa has reportedly taken a significant stride towards the implementation of its CBDC, with the South African Reserve Bank (SARB) completing a technical proof-of-concept for the initiative. 

Specifically, the initiative – going by the name “Project Khokha 2 (PK2)” – has reportedly moved to the second stage of SARB’s Project Khokha (PK1), established in 2018. 

It carried out experimentation with distributed ledger technology (DLT) for interbank payments‘ settlement, having managed to make a precise copy of the banks’ “SAMOS” real-time gross settlement system.

This second phase, PK2, was reportedly introduced in February last year, with testing conducted for clearing, trading, and settlement throughout the proof-of-concept environment.

Entities in the sector that took part in the testing reportedly included  Absa, FirstRand, JSE Limited, Nedbank, and Standard Bank, forming the Intergovernmental Fintech Working Group (IFWG).

SARB – utilizing the tech – carried out trials for the issuance of debt instruments, rolling out two payment options for settlement, a wholesale central bank digital currency (wCBDC) and a wholesale settlement token (wToken), a commercial bank issued form of private money.

The proof-of-concept reportedly built two DLT platforms, one which functions as a decentralized trading platform and the other taking care of management for the CBDC.

A bidirectional bridge with similarities to the ones present in decentralized finance (DeFi) when transferring crypto throughout different blockchains was also developed, enabling the portability of the CBDC between the two platforms.

The outcome of the initiative reportedly emphasized the regulatory, business, and operational implications that DLT would have in the market. 

“A transition to a DLT-based system requires careful planning and execution and may involve running a DLT-based system in parallel to the existing system for a while, perhaps indefinitely.”