The South African Reserve Bank (SARB) has successfully completed a 14-week realistic trial of its proof of concept interbank clearance and settlement system built on Quorum, an Ethereum-based enterprise blockchain platform created by investment bank JPMorgan.

The test was carried out under Project Khokha which means ‘Pay’ in isiZulu. SARB carried out the project in partnership with banks such as Absa, Capitec, Discovery Bank, FirstRand, Investec, Nedbank, and Standard Bank. The central bank also collaborated with Ethereum technology company ConsenSys and PwC.

In its report, the South African central bank says the blockchain managed to process the 70,000 transactions handled by the country’s automated settlement system within two hours in an average of two seconds while maintaining complete confidentiality.

“Project Khokha is seen as an initiative in collaborating for innovation, 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,” states the report.

Project Khokha builds on programs already carried out by other central banks in Europe, Singapore, Canada, Brazil, and Japan seeking to apply distributed ledger technology (DLT) in banking.

Further Study is Required

Although the trial was a success, SARB says in the report that further study is required to establish if DLT is suitable for interbank settlements.

“Key considerations that need to be addressed include the evaluation of supporting frameworks and other systems that integrate with the RTGS system, as well as the legal, regulatory and compliance factors,” states South Africa’s central bank.

In addition, SARB’s Deputy Governor Francois E. Groepe said the blockchain-based system will not replace the current automated real-time gross settlement system but could be used as a backup fourth layer.