Page 21 - PROJECT KHOKHA 2

THE PROOF-OF-CONCEPT
The scope of Project Khokha 2
In order to gain a deeper insight into how DLT-driven innovation is impacting financial markets, the technical teams designed, for DLT and reinterpreted the existing market infrastructures, roles and processes in the context of DLT-based market developments.
The brief to the technical teams included building three prototypes in the PK2 PoC, namely:
THE PROOF-OF-CONCEPT
A wCBDC as a liability of the SARB to serve as an alternate form of central bank money, similar to money in reserve and settlement accounts with the central bank.
A DLT-based SARB debenture, which crucially had to be designed specifically for DLT and not merely move the existing process onto DLT.
A wToken as a commercial arrangement (i.e. not a liability of the SARB). The wToken had to be a settlement asset used in the settlement of wholesale transactions (CPMI, 2019), and could be considered as a stablecoin as it derives its value from the asset(s) backing it.
The co-design process followed
In order to consider the true impact that DLT might have on existing processes, the technical teams were given freedom and indeed the mandate to re-imagine the current South African debentures market through engagement with various stakeholders in a co-design process, which resulted in the design of the PK2 DLT-based ‘debenture token market’. It was important to confirm upfront whether a DLT- based market could reliably execute securities trade and identify differences with
the current market to highlight potential policy and regulatory implications. During the workshops, the project team gained an understanding of the purpose of various role players, their roles in the market, the role of debentures and financial instruments more broadly, as well as the existing processes.
The DLT-based design was informed by asking the following key questions:
• How would one implement the issuance, trade and settlement of debentures differently using DLT?
• How could the various role players and financial market infrastructures (FMIs), like the CSD, function in a DLT-based debenture token market?
• Does a DLT-based design hold promise and meaningful new benefits for the debentures market and securities trade more broadly?
PROJECT KHOKHA 2 21