The Intergovernmental Fintech Working Group (IFWG) Innovation Hub has announced the launch of Project Khokha 2 to explore the policy and regulatory implications of innovation in financial markets driven by distributed ledger technology (DLT).
How the Project will work
Project Khokha 2 is meant to issue, clear and settle debentures on DLT using tokenized money as a minimum viable product (MVP) to inform policy and regulatory reflections. Participants with the industry will be able to purchase the debentures with a wholesale central bank-issued digital currency (wCBDC) and a wholesale digital settlement token (wToken). The wToken can be considered as a privately issued stablecoin used for interbank settlement.
Transparency and responsible innovation
Project Khokha 2 intends to produce a public report which will detail the insights on a number of policy and regulatory challenges introduced by such innovation. This is in line with the IFWG’s objectives to promote responsible innovation and provide regulatory clarity on financial
technology (fintech) innovation in support of its members’ mandates, including stable and resilient financial markets.
The following industry participants will join the IFWG on Project Khokha 2: Absa, FirstRand, Investec, the Johannesburg Stock Exchange (JSE Limited), Nedbank, Standard Bank and Strate.
Three firms have been chosen to partner on the project:
- Accenture will be responsible for developing the wCBDC for Project Khokha 2; the company has extensive global experience on CBDC projects, both retail and wholesale, which will benefit the IFWG on this project.
- Block Markets Africa (BMA) was selected to produce the DLT-based debentures as well as the wToken for the project. BMA’s experience in tokenizing and trading financial instruments across various DLT platforms will help create a Khokha network to interconnect the DLTs on the project.
- Deloitte will document the insights gained from Project Khokha 2 in a public report; the company has gained experience on many similar projects internationally and will independently reflect on the implications brought to light through the MVP and through engagement with relevant stakeholders.
Project Khokha 2 is a continuation of the structured analysis of the impact of DLT on financial markets, both the benefits and the risks, by gaining practical experience through experimental trials with industry. The project should not be seen to reflect support for any particular technology or as a radical policy shift. However, it is the project’s objective to assist in the formulation of appropriate fintech-related policy frameworks through the publication of a thought leadership report.