The South African Reserve Bank is set to assess regulatory implications of new technologies in the industry, including cryptocurrencies.
With the responsibility to promote a ‘sound and effectively regulated financial system, SARB said it takes a balanced approach to technological innovations, considering the potential benefits and risks of each innovation.
In response, it has established Financial Technology Programme to strategically assess the emergence of FinTech in a structured and organised manner, and to consider its regulatory implications
“The main goal of the programme is to track and analyse fintech developments and to assist policymakers in formulating frameworks in response to these emerging innovations,” SARB said in a statement.
It will investigate three objectives: crypto-currencies, ‘innovation accelerators’, and distributed ledger technologies.
The first objective is to review private cryptocurrencies to inform an appropriate policy framework and regulatory regime. This review will address regulatory issues such as clearing and settlement risks, exchange control impacts, monetary policy and financial stability, and other matters such as cybersecurity considerations.
It will collaborate with other regulatory bodies on matters such as tax implications, consumer and investor protection, and money laundering activities, with the review expected to be completed in the second half of 2018.
The second objective is to investigate and decide on the applicability ‘innovation facilitators’, which the SARB defines as a collective term for innovation hubs, regulatory sandboxes and accelerators. SARB said ‘clear and transparent eligibility and participation criteria’ will be developed to assist in the consideration of applicants into a regulatory sandbox. It hopes to conclude this report by the third quarter of 2018.
SARB’s third objective is to launch Project Khokha, which will experiment with distributed ledger technologies (DLTs). The third objective is to launch Project Khokha, which will experiment with distributed ledger technologies (DLTs).
“The aim of this project is to gain a practical understanding of DLTs through the development of a proof of concept (POC) in collaboration with the banking industry. The objective of the POC is to replicate interbank clearing and settlement on a DLT which will allow the SARB and industry to jointly assess the potential benefits and risks of DLTs. The POC involves the processing of wholesale payments using Quorum, an Ethereum enterprise DLT. The SARB is aware of multiple DLTs being experimented with globally,” says the SARB.
ConsenSys (an expert on Quorum) is the technology partner that will assist the SARB in the design, setup of infrastructure and running of the POC. “This does not imply a radical move to DLT for the country’s national payments infrastructure, but rather a structured approach to understand the implication of using a tokenised asset on DLT technology to transfer value,” the bank added.
Copyright © 2018 RegTech Analyst
Copyright © 2018 RegTech Analyst
