South African banks successfully exchange assets via blockchain network

Rage Review : South Africa's large banks have successfully exchanged assets between their blockchain networks. This is the first distributed ledger solution in South Africa's financial services industry, which aims to jointly create a blockchain-based ecosystem based on cryptocurrency but linked to legal tender. The transaction allows banks to form alliances in a faster way and provide loans to alliance members. The previous management and investigation methods involving manual processes made it take several weeks for alliance loans to be completed. Through blockchain solutions, cryptocurrencies and smart contracts on electronic exchanges can be linked together to shorten settlement time and reduce transaction costs.

Translation: Nicole

Large banks in South Africa have successfully exchanged assets (among themselves) over a blockchain network.

Banks (Absa, Investec, Nedbank, Rand Merchant Bank/First National Bank and Standard Bank) as well as the South African Reserve Bank (Sarb), the Financial Services Board, the South African Payments Association and central securities depository Strate are part of the working group, which aims to jointly create the first distributed ledger solution for the South African financial services industry.

Tanya Knowles

Tanya Knowles, Executive Director of Strategy’s Fractal Solutions, said:

“It’s a great learning platform where we can share knowledge and experience, rather than developing things in isolation.”

The working group successfully established a blockchain network using Ethereum, an open source and free-to-use distributed computing platform.

Foundery, a RMB-backed incubation center, explained that the group chose to use open source products because it was piloting many concepts rather than building a production system. In addition, the cost of using licensed products became prohibitive given the number of institutions involved in the project, and the group also believed that paying for products that were still under development was not a good idea.

Farzam Ehsani, head of the RMB Blockchain Initiative (representing FirstRand Group to study blockchain technology), said:

“Since we are in learning mode, we will definitely consider other platforms because the entire blockchain industry is an emerging industry and new platforms are emerging.”

Sarb distributed a smart contract to the rest of the working group via the network, said Sophia Dower, strategic implementation project manager at Absa’s Africa technology division.

Smart contracts are the foundational solution the working group is trying to develop. Dower explained:

“The working group aims to jointly create a blockchain-based ecosystem based on cryptocurrencies but pegged to fiat currencies, which will allow banks to form consortia and grant consortium loans in a quick and simpler way.”

She added that the proposed blockchain solution for alliance loans, which would combine cryptocurrencies traded on electronic exchanges with smart contracts, could bring more transparency to the market while also cutting settlement times and transaction costs. Currently, the largely manual process involves extensive due diligence and administration, meaning alliance loan transactions can take weeks to settle.

Now that an asset has been published across the network and its recipient can derive value from it, the working group is working on successfully exchanging two assets of equal value.

Farzam Ehsani

Meanwhile, the working group is continuing to learn about the platform. Ehsani said:

“Just like the Internet, it would be hard to create a Facebook if the Internet wasn’t fully functional. So the platform we’re working on now, I believe, will advance many future use cases.”

Hunter said the group explored different technologies and matched use cases for different assets, such as stocks or bonds, to specific solutions.

The working group, set up earlier this year, plans to bring a commercially viable working solution to market before further exploring and experimenting with the technologies. Such a solution would also require regulatory approval.

No launch date has been announced for the blockchain-based solution for business use.